Asia’s benchmark coal price approached a three-year low of USD 70/t this week as mild summer temperatures continued to limit demand among some of Australia’s biggest coal customers.
Global Coal’s Newcastle index has shed 5% on the week to reach USD 70.71/t, its lowest level since September 2016. The Pacific basin’s benchmark for high grade (6,000 kcal/kg) Australian coal deliveries to Asia stands 30% below where it began the year.
Analysts at ANZ bank highlighted concerns about Asian demand coupled with “record” cargoes out of Australia’s biggest coal export hub.
A combination of elevated coal imports and relatively weak power generation has pressured China’s domestic coal prices to levels that have discouraged miners from shipping to coastal power plants, said Zeng Hao, an analyst for sxcoal.com.
Port inventories in northern China have fallen from 24m tonnes to 21.5m tonnes in recent weeks, Zeng said, though the picture was not uniform across the country.
Inventories in the south have continued to build with stocks among coastal power plants now at 18m tonnes – around 3m tonnes more than the same time last year, he added.
Record rainfall is expected to limit energy demand in southern China at least through until July.
“But after that we will probably see temperatures increase,” said Zeng, who anticipates domestic coal prices to “climb a little bit” by next month from around CNY 600/t to CNY 630/t.
Coal prices on China’s Zhengzhou exchange were up almost 1% on the week at CNY 598/t (USD 86.60/t).
China has been growing its coal imports this year, but it is also delaying Australian cargoes and forcing some trading partners to sell into other markets – sometimes at a steep discount to the Newcastle benchmark.
Australia’s main customer for high-energy coal, Japan, has seen its coal imports fall 2% so far this year, finance ministry data showed this week. This was mostly due to high inventories and greater nuclear generation, said AME Consulting executive director Lloyd Hain.
Newcastle also faces pressure from other falling global benchmarks where steep discounts encourage the shipping of cargoes into the world’s most expensive basin.
Global Coal’s European DES ARA index fell 4% on the week and remains USD 22/t below Newcastle.
Newcastle coal stocks fell by roughly 100,000 tonnes to 1.9m tonnes in the week through 16 June, according to port data. There were nine vessels waiting to take delivery, up from six last week.
Indian power plant stocks have declined by nearly 1% on the week. Inventories monitored by the country’s Central Electricity Authority last stood at 26.9m tonnes. This was enough to meet 15 days of power generation.