LAUNCESTON, Australia, Jan 30 (Reuters) – Asian offshore thermal coal markets are losing steam, with prices and volumes falling as winter demand passes and Europe’s energy crisis eases.
Prices for the main traded grades for coal used in power stations fell to their lowest level in months last week, and to the lowest level in a year for one of the main Australian varieties.
Australian coal in Newcastle port with an energy value of 5,500 kilocalories per kg (kcal/kg), as assessed by commodity price reporting agency Argus, fell to $129.87 a tonne in the week to on January 27, the lowest level from the week to January 27. 21, 2022.
This grade of coal is most often purchased by Indian utilities, and was the preferred Australian thermal grade among Chinese buyers prior to Beijing’s unofficial ban on Australian shipments, imposed amid a diplomatic spat in mid- 2020.
While the Chinese ban has been lifted, buyers are unlikely to return to Australian thermal coal, given the availability of cheaper coal of similar quality from Russia.
The higher quality 6,000 kcal/kg Newcastle grade also fell last week, with the index ending at $307.47 a tonne, the lowest level since April and 31% below the record of $442.89 reached in early September.
The Newcastle 6,000 kcal/kg physical cargo price compiled by globalCOAL was even weaker, ending last week at $294 per tonne, dipping below $300 for the first time since April last year.
Buyers in Japan and South Korea typically purchase this grade, usually on a contract basis, which means that the spot market accounts for only a small part of total volumes.
The price weakness was not limited to Australian thermal coal, but qualities from Indonesia also fell.
Indonesia is the world’s largest exporter of thermal coal, while Australia ranks second and Russia third.
Lower quality Indonesian coal with an energy value of 4,200 kcal/kg ended last week at $80.39 a tonne, the lowest level since early September.
This grade is preferred by Chinese utilities for its low sulfur and ash content, and is also sought after by Indian power plants because it is cheaper than Australian and South African alternatives.
Russian thermal coal from Vostochny port, which China is buying up heavily after Japan cut imports following Russia’s invasion of Ukraine, has also weakened.
The price fell to $157 a ton in mid-January, the lowest since December of last year.
SLIDING VOLUMES
The lower prices for thermal coal are coming as demand for seaborne cargoes appears to be weakening between Asia’s top two importing nations.
China, the world’s biggest coal importer, is forecast to import 23.96 million tonnes of all grades in January, up from 28.33 million tonnes in December, according to data compiled by commodity analysts Kpler.
If final January arrivals are in line with Kpler’s estimate, it will be the weakest month for Chinese imports since August.
India, the second ranked importer, is expected to land 16.20 million tonnes in January, roughly in line with December’s 16.22 million tonnes, but it is worth noting that December was the weakest month for imports since February 2022.
Imports from Japan and South Korea, the third and fourth largest coal importers in Asia, appear to be slightly stronger in January than in December.
However, January is historically a strong month for the two North Asian countries, with imports falling in the following months as the winter peak period passes.
Overall, the picture of lower prices and volumes is that Asia’s coal demand remains strong, but market foam caused by Russia’s invasion of Ukraine and the subsequent threat to Europe’s energy supply seems to be disappearing.
Edited by Simon Cameron-Moore
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