Nena News

ASIA-PACIFIC COAL – Prices stall as China demand softens

(Montel) Asia-Pacific coal price gains have stalled amid signs of flagging Chinese and Indian demand, participants said on Thursday.

Broker Global Coal’s benchmark Newcastle [Australia] index was assessed last at USD 116.28/t, down by 0.7% on the week.

“Prices are coming off, and I am not very bullish at the moment as China feels softer and better supplied,” said a coal analyst with a Singapore-based trading firm.

China’s Zhengzhou front-month 2018 thermal coal futures contract settled on Wednesday down 1.5% on the week to a near three-week low of CNY 634.60/t (USD 95.92/t).

A physical coal broker also said there was “weak demand from China”, with a number of July-loading capesize cargoes of Australian coal on offer, but failing to find buyers.

This was despite lingering disruptions to cargo loading operations at Australia’s largest export hub of Newcastle, where the vessel queue was pegged last at 24 vessels, compared with 19 a week ago, port data showed.

“Australia is relatively tight, but my concern is a bit more on the demand side,” said the analyst.

But despite the week-on-week decline, the Newcastle index has risen steadily, albeit slightly, from Monday’s two-week low of USD 116.02/t and was still a considerable 44% higher on the year.

Unusually hot weather in China, in recent weeks, has resulted in strong demand for coal-fired generation, to meet cooling system requirements.

But below-normal temperatures will “creep into” northeastern China– where much of the country’s coal-fired generation demand is focused – over the coming 6-10 days, according to forecaster Radiant Solutions.

Indian weakness
Indian demand was also proving less pronounced, as monsoon rains – which can hamper vessel unloading operations – deterred buyers from purchasing spot material, participants said.

“The Indian market is also softer, so it’s a harder market in general right now,” said the analyst.

Inventories at 114 Indian coal-fired plants monitored by the country’s Central Electricity Authority were last seen at 15.3m tonnes, down by 2.5% on the week and sufficient for just 9 days’ generation.

But this also reflected a relatively strong call on coal-fired units, amid a possible shortfall in alternative power sources.

“Monsoon rains in India have been weaker than normal lately, which is not a boon for hydropower output,” said Diana Bacila, senior analyst at Oslo-based Nena.

Price indicators (week on week change):
Global Coal Newcastle index – USD 116.28/t (USD -0.85)
Global Coal Richards Bay index – USD 102.88/t (USD -1.65)
Zhengzhou (ZC) thermal coal futures, September contract – CNY 634.60/t (CNY -9.80)

Stocks and Queues:
PWCS Newcastle (Australia) stocks – 2.02m tonnes (0.07m tonnes)
PWCS vessel queue – 24 vessels (5 vessels)
Port Kembla Coal Terminal (Australia) stocks – 0.27m tonnes (-0.02m tonnes)
Kembla vessel queue – 3 vessels (3 vessels)
Indian power plant stocks – 15.3m tonnes (-0.4m tonnes)


Reporting by:
Laurence Walker
09:14, Thursday, 28 June 2018