Benchmark Australian coal prices for delivery to Asia retreated this week amid concerns China has extended import restrictions to other ports.
Global Coal’s Newcastle index fell 3% on the week to USD 90.96/t. The benchmark for high grade (6,000 kcal/kg) Australian coal deliveries to northeast Asia touched its lowest level in nearly two years on Monday when it hit USD 89.75/t.
The market for lower grade 5,500 kcal/kg calorific coal was also down nearly 3% on the week at USD 58.50/t for March delivery, according to the API 5 index, a reflection of Newcastle exports to China.
Media reports this week suggested China had extended quarantine checks for Australian coal to the southern port of Fangcheng. Until now, delays of up to 40 days for clearing Australian coal shipments have been confined to five ports operated by Dalian customs in the north.
Concerns about China’s appetite for Australian coal was driving volatility in the 5,500 kcal/kg segment of the Asian market, New Hope mining boss Shane Stephan said this week.
“It only needs to have a short period of imbalance between production and consumption and it can totally swamp the seaborne trade in the Pacific,” he said in comments reported by the Australian Financial Review.
“China is not demanding imports of thermal coal and so that coal is finding another home somewhere else.”
Australian export volumes to China were not yet showing signs of decline, according to Vivek Dhar, a mining and energy commodities analyst at the Commonwealth Bank of Australia.
“Australian coal ports have not seen any unusual fall in coal exports with paperwork to go to China.”
Newcastle coal stocks fell by 60,000 tonnes to 1.49m tonnes in the week through to 17 March, according to port data. There were four vessels waiting to take delivery, down from six last week.
Uncertainty around Chinese policy was instead driving the country’s traders to put a premium on alternative sources, which would probably weigh on Australian volumes in the longer run, Dhar said.
“The pricing differentials have come to favour Indonesian coal over Australian coal.”
Indonesia’s ICI 2 index for 5,500 kcal/kg was recently assessed at around USD 71/t, up nearly 7% on its January average, according to one Indonesian coal trader.
Chinese officials have previously indicated they would like to keep domestic coal prices within a band of CNY 500-600/t (USD 64-73/t) that is neither too high for utilities nor too low for China’s miners.
Domestic coal prices were down marginally on the week at CNY 592.80/t (USD 88.55/t) on the Zhengzhou exchange.
Meanwhile, Indian power plant stocks have reached their highest levels in nearly three years. Inventories monitored by the country’s Central Electricity Authority last stood at 29.6m tonnes, up 5% on last week. This was enough to meet 17 days of power generation.
Data gathered by Motilal Oswal Securities suggested the recovery was at least partly due to a 1% decline in generation demand over the first two months of the year.
India has proved a source of support to the region’s seaborne market, as expanding domestic coal production last year failed to keep pace with rising demand for the fuel, miner BHP said in its commodity outlook last month.