Reaction to Shenhua’s latest price cut was swift among buyers in the Chinese seaborne market for imported 5,500 kcal/kg NAR thermal coal in Asia trade, with firm bids dropping $1-1.50 on day to as low as $66/mt CFR South China, said market sources Thursday.
“We are bidding at $66/mt CFR southern China for September-delivery Capesize cargoes of 5,500 kcal/kg NAR Australian thermal coal,” a Singapore-based trader said.
“For August arrival cargoes, we are bidding at $66.50/mt CFR,” he added. Other market sources also reported hearing lower bids for September arrival cargoes at $67/mt CFR South China for Australian 5,500 kcal/kg NAR coal to indicative offers at $67.50/mt, in Asia trade.
“August is going to be ugly, September brighter,” was how another trader summarized the market.
An August-delivery Capesize cargo of 5,500kcal/kg NAR Australian coal offered at $69/mt CFR South China found no bidders, said a trader in Xiamen, China.
Distressed Capesize cargoes of 5,500kcal/kg NAR thermal coal were heard in the market including an Australian cargo bound for Fangcheng port at $67/mt CFR, and another that was offered at Yuan 485/mt CFR South China (or $78.90/mt including 17% VAT).
HIGH-ASH FOB NEWCASTLE
A Shandong-based trader noted that FOB prices for 5,500 kcal/kg NAR Australian thermal coal may now have to dip towards $56/mt FOB for any deals to be done in the Chinese market.
One trader in Singapore reported seeing FOB bids on high-ash Australian cargoes for August loading at $57/mt to offers at $57.75-58/mt, and a trade was heard elsewhere in the market at $57.50/mt for an August loading cargo.
“We can only wait for China’s electricity consumption to increase as the summer season goes on,” a Shanxi-based trader said.
For August or September delivery, Australian 5,500 kcal/kg Australian coal, the lowest offer heard by a trader in Beijing was at $54-55/mt FOB. A Capesize 130,000 mt ship was fixed to sail from Newcastle, Australia at the end of July to Xiamen, China at $10.50/mt, according to shipping sources.
DOMESTIC BUYERS IN WAIT-AND-SEE MODE
Domestic thermal coal buyers at north China ports including Qinhuangdao, were waiting to see if other Chinese coal producers such as China Coal Group, Datong and Yitai fall into line behind Shenhua which cut its selling price to long-term customers by Yuan 10-15 to Yuan 495/mt ($80.56/mt) FOB, earlier Thursday.
Shenhua’s new price of Yuan 495/mt FOB Qinhuangdao adjusts to a lower price of about Yuan 493/mt based on the Fenwei/Platts CCI 1 specification for 5,500 kcal/kg coal which is for 0.7% sulfur, compared with 0.6% sulfur — the general sulfur content of Shenhua’s specification of domestic 5,500 kcal/kg NAR coal.
Toward the end of June, Shenhua lowered its 5,500 kcal/kg NAR coal price by a margin of Yuan 10-20 to Yuan 510/mt FOB Qinhuangdao in a move that sent shockwaves around the market for seaborne-traded cargoes.
Traders at China’s northern trading hub for domestic 5,500 kcal/kg NAR thermal coal were maintaining their offer prices on spot-traded cargoes at Yuan 495/mt FOB Qinhuangdao, and bids were steady at the port at Yuan 490/mt, said market sources in China.
At the close of Asia trade, the Platts/Fenwei China Coal Index (CCI 1) for domestic thermal coal traded at Qinhuangdao port was assessed at Yuan 494/mt inclusive of VAT, and down Yuan 0.50 on day.
The CFR South China (CCI 8) price was assessed at $67.50/mt basis 5,500 kcal/kg NAR, excluding Chinese VAT, and was 25 cents lower than the previous day’s assessment.
Platts assessed the FOB price of Newcastle 5,500 kcal/kg NAR thermal coal with typical ash of 20% at $59/mt, and down 25 cents on day.