LAUNCESTON, Australia (Reuters) – Thermal coal prices in Asia have reached multi-year highs due to strong demand and some supply constraints, but some types of fuel have done better than others.
The headline-grabbing rally was for high quality Australian thermal coal. The weekly index of 6,000 kilocalories per kilogram (kcal / kg) of coal at the port of Newcastle, as assessed by the commodity price information agency Argus, reached $ 121.40 per tonne as of during the seven days preceding June 4.
It was the highest in over a decade. That rating has now climbed 49% since the end of last year, and 162% from its 2020 low of $ 46.37 per tonne in September, reached amid economic fallout from coronavirus lockdowns in September. Asia.
The driving force behind the price hike has been strong demand from Japan and South Korea, the main buyers of high-quality Australian thermal coal, as expectations of a hot summer in the Northern Hemisphere will lead to an increase of electricity demand for air conditioning.
It should be noted that the Newcastle index reflects a price for relatively low volumes of coal. Most of this quality is purchased on short and medium term contracts, rather than on the spot market.
However, the strong recovery will result in further contract negotiations. This is an indicator that utilities are already looking for cargoes to make sure they don’t experience any squeeze, like last winter when colder-than-expected weather caused an increase in demand for electricity for the heater.
While not getting as much attention, much of the actual volume action for Australian coal falls in the 5,500 kcal / kg category. It is the main type sought by Indian utilities, and was popular with Chinese buyers before Beijing’s unofficial ban on imports from Australia, imposed last year as relations between the two countries collapsed. deteriorated.
This quality has also seen prices rise, with Argus valuing 5,500 kcal / kg of coal at $ 70.10 per tonne in Newcastle on June 4, roughly double the $ 35.04 last September.
While a gain of 100% looks impressive, it does mean that the lower grade coal has lagged behind its higher grade counterpart significantly.
This reflects the readjustment of coal flows across Asia in the context of the Sino-Australian dispute: Australian exporters have had to switch from China to other buyers, notably India, but also smaller importers like the Vietnam and Bangladesh, and offer competitive prices to replace other suppliers, such as Indonesia and Russia.
India’s maritime imports of all types of coal fell somewhat in May, falling to 17.62 million tonnes from April 18.68 million, according to Refinitiv’s ship and port tracking data. .
But the data breakdown shows imports from Australia hit 6.43 million tonnes – the second highest since Refinitiv started valuations in January 2015, beaten only by January’s 6.80 million that year. year.
Imports from Indonesia fell to 5.52 million tonnes in May, from 6.3 million in April, and well below levels of around 8-10 million tonnes per month that prevailed before the ban Chinese Australian coal.
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But Indonesia, the world’s largest shipper of thermal coal, shifted its exports to China, which imported 11.24 million tonnes from the country in May, up from 7.52 million in April and 9.69 million in May. 2020.
China’s demand for Indonesian coal, which tends to be less energetic than Australia, is also helping to drive up prices. Singapore Exchange’s 4,200 kcal / kg coal contract jumped to $ 57.50 per tonne on June 3, the highest since the contract began trading in early 2018.
The contract closed at $ 56.66 per tonne on Monday, up 149% from the 2020 daily closing low of $ 22.97 recorded on September 17.
China, which counted Australia as its second largest supplier of coal, appears to be paying a heavy price for its import ban from the world’s second-largest shipper of thermal coal and not. 1 supplier of coking coal used in the manufacture of steel.
Chinese domestic coal prices have jumped this year as utilities struggle to source sufficient supplies, with consulting firm SteelHome valuing coal in Qinhuangdao port at 923 yuan ($ 144.21) per ton June 7.
Although this figure is lower than the peak reached so far this year of 1,038 yuan per tonne, reached on January 20, reached at the peak of winter demand, it is well above the broad range of 460 to 600. yuan which prevailed in the first nine months of 2020.
Overall, the different benchmark coal prices in Asia not only reflect the strength of underlying demand, but also reflect the disruption of China’s ban on imports from Australia.
Editing by Kenneth Maxwell