Asian buyers see Australian and Indonesian coal prices heading south as demand falls off
By Cecilia Quiambao
August 20 -
After several weeks of questioning where coal prices are headed, Asian thermal coal buyers are now convinced of a short term softening in Newcastle and Kalimantan coal prices due to various triggers -- chief of which are their perceptions that Indonesia still has a lot more coal to dispose of this year and China will decelerate its steam coal imports in the second half of 2009.
Physical coal trading in Asia is limited, with two tenders called by Korea Southern Power and Taiwan Power expected to take place next week, they said.
The Kospo tender involves 3 million mt for delivery this year and in 2010. The Taipower tender involves only four panamax shipments for delivery this year.
"The general trend is for coal prices to fall a little," one Japanese coal buyer said. "As long as Indonesian coal output is maintained, there is no reason for Australians to be bullish about the market." (See related chart: Platts 90-day-ahead spot market: Kalimantan (Indonesia) 5000K ($/mt): January 2 - August 14 2009.)
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Indonesian shippers eager to dispose of their cargoes are expected to be aggressive on pricing, the Japanese buyer said, adding that Australian coal shippers will have to respond to this by lowering price expectations.
A Korean genco source said Newcastle coal prices are now embarking on a downside trend.
"There is no reason for Australian suppliers to keep prices so high," the Korean genco source said.
In July, one physical Newcastle trade on globalCOAL registered at slightly above $80/mt FOB – a transaction that was met with skepticism even by Australian coal shippers.
Platts' 90-day Newcastle coal price assessment on August 10 was $75/mt FOB. (See related chart: Platts 90-day-ahead spot market: Newcastle 6300K ($/mt): January 2 - August 14 2009.)
Buyers and traders said Newcastle spot price assessment should be further lowered.
However, an Australian coal shipper said he is still optimistic that Newcastle spot prices will be at the $80/mt FOB level come Christmas.
"Everybody's financial situation is turning around," the Australian shipper said.
Steel demand increase to impact thermal market
He said the recent increase in steel demand in Asia means that more Australian semi-soft coals and PCI material will be siphoned off from the thermal seaborne coal markets.
However, the Korean genco source said most traditional steam coal buyers from Japan, Korea and Taiwan have secured enough coal contracts for this calendar year.
A trader in the Philippines said state-run National Power Corp. has secured enough coal contracts for calendar 2009 and is not likely to hold any spot tenders for coal to be delivered this year.
Taipower's spot tender for four panamax shipments is expected to be the last it will hold for cargoes to be shipped this year.
The Japanese source said most thermal coal buyers in Japan have comfortable stockpiles and have secured enough contracts allowing most of them to stay away from the spot market for the current fiscal 2009 which ends in March 2010.
"Trading is very limited now. There is no big movement in the market," the Japanese source said, adding: "In the short term or until the end of this calendar year, prices will stay below $80."
The Japanese buyer said that if Newcastle thermal coal were to be offered to his company for prompt shipment, he will only agree to buy the cargo at less than $70/mt FOB.
"Nowadays, nobody will buy Australian coal at over $70," the Japanese source said.
The recent rise of Newcastle prices to more than $70/mt FOB - or up to $75/mt FOB – has proved a disincentive for Chinese utilities to import more Australian and Indonesian thermal coals, industry sources said.
The Japanese source said he does not expect Chinese power utilities to exhibit the same appetite for coal imports they showed in the first half of this year.
The relatively high Newcastle FOB prices are expected to deter Chinese buyers from importing coal, the Japanese buyer said.
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