The Pacific basin’s benchmark thermal coal price has slid 2% over the past week amid signs of weakening demand among one of the region’s biggest customers of the fuel.
Global Coal last assessed its Newcastle index at USD 87.37/t, down USD 1.79 on where it stood last Thursday. The reference price for high grade (6,000 kcal/kg) Australian coal deliveries to Asia is down 13% from where it began the year.
Export volumes out of Australia’s main thermal coal hub declined 6% in April to 8.4m tonnes, Hunter Valley Coal Chain Coordinator data showed.
At the same time, Port Waratah Coal Service data showed the share of exports going to Japan – Australia’s biggest coal customer – slipped 5 percentage points year on year to 46% in April. This implied a 15% drop in Newcastle coal export volumes to Japan.
“We’ve obviously seen a resumption of some nuclear power,” said ANZ bank analyst Daniel Hynes. “And coal being relatively expensive in the early part of the year has seen that suffer.”
Japan restarted five reactors last year that had been shut down due to tighter safety restrictions in the wake of the 2011 Fukushima nuclear disaster.
A slump in LNG prices also reached levels by the start of April that were low enough to encourage coal-to-gas switching in Japan, Rory Simington, Asia Pacific head of coal research at Wood Mackenzie, recently told Montel.
By contrast, China saw its share of Newcastle exports rise 3 percentage points to 20% in April – despite reports the country’s customs delays were hitting Australian volumes.
“The concerns about Australian coal imports being constrained are a little misguided,” said Hynes, pointing to robust Chinese demand for Australian fuel.
“The backdrop is still positive for coal demand in China itself. Manufacturing activity has stabilised and started to pick up, but clearly the dynamics between domestic and imported coal are playing out,” he said.
“We are expecting to see the high level of inventories weigh on the import demand for coal.”
Coal prices on China’s Zhengzhou exchange rose 1% on the week to CNY 613.60/t (USD 91.11/t).
Peabody, the world’s largest private coal miner, has estimated 50 GW of new coal generation capacity expected to come online in 2019, mostly in Asia. Yet some countries, such as Thailand, are looking to reduce the share of coal in the power mix to help curb emissions.
In India, power plant stocks have slipped for their first week since October, though they remain around their highest levels in three years.
Inventories monitored by the country’s Central Electricity Authority last stood at 31.6m tonnes, down 1% on the week. This was enough to meet 18 days of power generation.
“The draw down is because of summer demand,” said Rahul Sharan, lead research analyst at shipping consultancy Drewry.
“I doubt India has adequate supply to meet the peak summer demand. I believe we can assume an increase in coal imports over next few months.”