Nena News

ASIA-PACIFIC COAL – Newcastle index falls on weaker demand

(Montel) Asia-Pacific benchmark Newcastle coal prices have softened over the past week, amid signs of more sluggish demand, although threats to production in several key producing counties limited losses, participants said on Thursday.

The Global Coal Newcastle index eased 0.3% over the past week to USD 98.98/t, but was still close to last Thursday’s seven-week high of USD 99.42/t.

Reports late on Wednesday that South Africa’s coal sector would be hit by widespread strike action in the coming days failed to offer any immediate support to the market, amid sufficient alternative supply and signs of weaker Chinese buying interest.

“Newcastle prices have weakened as no one is buying spot tonnes right now,” said a Singapore-based coal broker.

One key buyer – which has been actively buying in recent weeks – was also absent from the market, participants said.

Yet with a number of supply issues on the horizon, price losses were likely to be limited.

Supply threats
“Australian coal supply is still tight due to previous strikes [at Glencore-owned mines], port maintenance and adverse weather conditions at ports,” said Diana Bacila, a senior analyst at Oslo-based Nena, adding Indonesia was also facing “abnormal rainfall”, which could threaten mining and export operations.

“The risks remain to the upside over the short-term, as seasonal demand has not yet reached peak levels,” said Pira analysts in a note.

Indeed, India’s appetite for imported coal was anticipated to remain buoyant over the coming weeks, amid a shortage in supply ahead of the winter demand season. 

Inventories at 112 of the country’s power stations were unchanged week on week at 7.9m tonnes, just 300,000t higher than mid-October’s three-year low of 7.4m tonnes, Central Electricity Agency figures showed.

“Coal stocks at power plants have improved mildly, but are still at critical levels,” said Bacila, noting state-owned coal producer Coal India was “struggling to bring more supply to the market”. 

Meanwhile, there were growing concerns about the potential re-emergence of the La Nina weather pattern this year, which can have an adverse impact on key coal producing and consuming countries.

There is a 50% chance that La Nina will return this year, according to the Australian Bureau of Meteorology’s latest report, published on Wednesday.

“Reports of a possible La Nina weather event, which brings wetter-than-normal conditions, raised the spectre of further supply disruptions,” said Australia’s ANZ Bank in a note.

Price indicators (week on week change):
Global Coal Newcastle index – USD 98.98/t (USD -0.34)
Global Coal Richards Bay index – USD 92.69/t (USD -2.77)
Zhengzhou (ZC) thermal coal futures, January contract – CNY 630.80/t (CNY +18.20)

Stocks and Queues:
PWCS Newcastle (Australia) stocks – 2.32m tonnes (+0.42m tonnes)
PWCS vessel queue – 11 vessels (+2 vessels)
Port Kembla Coal Terminal (Australia) stocks – 0.15m tonnes (+0.05m tonnes)
Kembla vessel queue – No vessels (unchanged)
Indian power plant stocks – 7.9m tonnes (unchanged)

Reporting by:
Laurence Walker
09:23, Thursday, 9 November 2017