Asia Pacific coal: Newcastle prices fall to 5-month low

23-Oct-2018

Asia-Pacific benchmark Newcastle prices have fallen to five-month lows on relatively weak Chinese import demand and abundant supply, participants said on Thursday.

Broker Global Coal’s benchmark Newcastle [Australia] index was assessed last at USD 106.68/t, down by 4% on the week and the lowest level since mid-May.

China’s Zhengzhou thermal coal futures contract for delivery next month settled last 0.6% lower on the week at CNY 663.60/t (USD 95.65/t).

“China is not buying anything, so the market feels very heavy in Asia,” said an analyst with a Singapore-based trading firm, noting “China is going to remain weak for the rest of the year.”

According to consultancy CRU, gas availability in China will likely rise 15-20% this winter, compared with the previous winter, resulting in lower coal demand.

“I see more supply than demand at the moment,” said a Singapore-based coal broker.

Indian demand

Meanwhile, a shortfall in domestic supply will likely keep Indian import demand buoyant, albeit for lower-grade material, according to participants.

Inventories at 123 Indian coal-fired plants monitored by the country’s Central Electricity Authority have fallen to fresh 11-month lows, of 10.2m tonnes, which is sufficient for just six days’ generation.

“Despite rising domestic production, coal supplies to power plants in India cannot keep up with strong demand from the power sector,” shipbroker Arrow said in a note.

While state-run producer Coal India had managed to ramp up its output by 4% on the month in September, its sales were down by 3% due to “logistical bottlenecks”, the shipbroker said.

“With no sign of easing in power demand, Indian coal imports are likely to rise in coming weeks.”

Price indicators (week on week change):

• Global Coal Newcastle index – USD 106.68/t (USD -4.37)
• Global Coal Richards Bay index – USD 98.29/t (USD -2.09)
• Zhengzhou (ZC) thermal coal futures, January contract – CNY 663.60/t (CNY -3.80)

Stocks and Queues:

• PWCS Newcastle (Australia) stocks – 1.85m tonnes (-0.21m tonnes)
• PWCS vessel queue – 12 vessels (-12 vessels)
• Indian power plant stocks – 10.2m tonnes (-0.2m tonnes)
• Indian power plant stocks in days – 6 (unchanged)

Source: MONTEL