Asia-Pacific coal prices soften as China demand wanes

1-Oct-2018

Pacific basin coal prices have softened over the past week with Chinese buyers poised to exit the market for a week-long holiday, although Indian demand for lower-grade material remained, participants said on Thursday.

Broker Global Coal’s benchmark Newcastle [Australia] index was assessed last at USD 112.42/t, around 1.4% lower than a week ago.

China’s Zhengzhou front-month 2018 thermal coal futures contract settled last 1.2% higher on the week at CNY 633.40/t, although due to currency depreciation, in US dollar terms the price was unchanged at USD 92.10/t.

“Golden Week has slowed the market a bit,” said a Singapore-based coal trader, regarding the week-long holiday in the first week of October, during which time Chinese trading activity grinds to a virtual halt.

At the same time, China has this week relaxed stringent quality checks on domestic coal loadings at China’s largest coal port of Qinhuangdao, according to media reports from the region.

The inspections had hindered shipments to plants in the south of the country in recent weeks, thereby driving demand for imported supplies, Montel reported on Wednesday.

Low stocks

But in India, coal import demand was likely to be strong, with generators facing “devastating coal market tightness”, Hans Gunnar Nåvik, senior analyst with Oslo-based StormGeo Nena Analysis, said on Wednesday.

Stocks at 121 Indian coal-fired plants monitored by the country’s Central Electricity Authority eroded by 7% over the past week to a fresh nine-month low of 11.1m tonnes – sufficient for just seven days’ generation.

Nevertheless, a weak rupee versus the US dollar meant importers were reluctant to purchase higher grade coal, said the Singapore-based trader.

“The market is a bit slow, and stocks in India are still low, but things are working through,” he said.

The rupee was seen last at 72.70 against the greenback, some 10% weaker than a year ago.

Price indicators (week on week change):

• Global Coal Newcastle index – USD 112.42/t (USD -1.64)
• Global Coal Richards Bay index – USD 97.88/t (USD 0.08)
• Zhengzhou (ZC) thermal coal futures, January contract – CNY 633.40/t (CNY 7.60)

Stocks and Queues:

• PWCS Newcastle (Australia) stocks – 1.83m tonnes (0.38m tonnes)
• PWCS vessel queue – 9 vessels (5 vessels)
• Indian power plant stocks – 11.1m tonnes (-0.8m tonnes)
• Indian power plant stocks in days – 7 (unchanged)

Source: MONTEL