Uncertainty over the scale of widely-expected price cuts by Chinese coal producers for July domestic cargoes has cast a cloud over the South China market for imported thermal coal, market sources said Tuesday.
Because of this, buyers and sellers in the seaborne market appear paralysed which is an obstacle to deals being done and also adds to the anxiety caused by recent price falls.
"Shenhua may want to see the level of rainfall and electricity demand before deciding whether to cut their prices or not," said a Shandong-based trader, speculating on the reason for Shenhua not yet announcing a price cut.
In the seaborne market for 5,500 kcal/kg NAR thermal coal, there was yet another price drop.
A July-delivery 130,000 mt Capesize cargo of 5,500 kcal/kg NAR Australian thermal coal was heard to trade at $69/mt CFR South China, according to a Liaoning-based trader who had lowered his buy price to $68/mt.
"Coal demand has remained low despite the upcoming summer peak season of electricity and coal consumption," a Guangdong-based trader said.
The Chinese imported thermal coal market has remained so bad that some traders have begun to look to other markets in southeast Asia such as Taiwan and Vietnam.
A Singapore-based trader, for instance, has decided to look for opportunities in selling Indonesian thermal coal to the Vietnamese market.
HIGH ASH
There were reports from traders Tuesday of lower prices being paid for high-ash, maximum 23% ash as-received basis, cargoes from Newcastle.
A Shanghai-based trader was offered a Capesize cargo of 5,500 kcal/kg NAR Australian high-ash coal at $60/mt FOB for August delivery, but he said the offer was too risky.
A Singapore-based trader said he had heard unconfirmed reports that a cargo of Newcastle 5,500 kcal/kg NAR coal had sold at $60/mt FOB for July delivery, but no other details were immediately available.
"The bid and offer spread for Newcastle 5,500 kcal/kg NAR coal is about 50-80 cents for July and August," he said. Buying interest and bids were generally sparse in the spot Newcastle cargoes for delivery to China.
South African 5,500 kcal/kg NAR thermal coal was trading at relatively higher levels of around $65-66/mt FOB Richards Bay thanks to stronger Indian demand.
China's domestic thermal coal market was steadier Tuesday following Monday's sharp falls.
Domestic 5,500 kcal/kg NAR coal was heard offered at Yuan 505/mt FOB Qinhuangdao, similar to levels a day earlier, while for 5,000 kcal/kg NAR product for sale at the north China port prices were heard unchanged on day at Yuan 442/mt, several market sources said.
"Domestic thermal coal prices are set to drop further on weak demand. We only hope the market will be better in September," said a trader in Shandong.
At the close of Asia trade, the Platts/Fenwei China Coal Index (CCI 1) for domestic thermal coal traded at Qinhuangdao port was assessed at Yuan 508/mt inclusive of VAT, down Yuan 1 on the day.
For 5,000 kcal/kg NAR domestic coal the CCI 2 price assessment was Yuan 442/mt, stable on the day.
The CFR South China (CCI 8) price was assessed at $69.50/mt basis 5,500 kcal/kg NAR, excluding Chinese VAT, 25 cents lower than Monday. Platts assessed the FOB price of Newcastle 5,500 kcal/kg NAR thermal coal with typical ash of 20% at $60.90/mt, down 45 cents on the day. The ash differential for this type of coal per 1% ash basis was 1 cent lower Tuesday at $0.52/mt.
