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Chinese Coal Demand Continues to Puzzle Commodity Traders
The conflicting reports coming out of China about demand for seaborne thermal coal continue but the one thing everyone seems able to agree upon is that demand is at best subdued. China Coal Report has more.
An Indonesian producer confirmed to Energy Publishing that they are still moving cargoes into China albeit at a slower pace than they had hoped for. “It’s all being done on a cargo by cargo basis,” he said.
“No end-users in China are placing orders for large tonnages and they are only ordering near-term deliveries because the prevailing consensus among buyers is that the price still has further to fall.”
A Singapore-based analyst said he had confirmed at least two cargoes of 4,200 GAR Indonesian product was sold into China last week at US$40/t FOB.
“The Chinese market is not doing great right now but it is doing better than it was three months ago,” the analyst said.
“In August no-one was selling anything into there. China is still buying. Not a lot, but they are buying.”
The trader also said Chinese and Indian buyers were pushing back against current thermal prices believing there was still downward movement to come. He added they were skeptical of the value of forward price curves which indicate price recovery in the first three months of 2013.
In the last week, physical trades of Newcastle product had fallen below the $80/t mark with two trades on November 2 on globalCOAL for December loading going for $79.25. On Tuesday there had been a very modest improvement with a Newcastle cargo for December delivery trading at $80.
Last week’s Energy Publishing’s NEX index (ex-Newcastle FOB) sat at $80.45. The last time the NEX fell below $80 was in November 2009.
The picture for Colombian coal is no more promising from a producer’s perspective. Energy Publishing’s Colombian Steam Coal Index dipped to $75.50/t on Friday from the previous week’s mark of $76 and $81 a fortnight earlier.
There have been three near-term delivery cargoes of Richards Bay product sold on globalCOAL in the last week – on October 3, two trades for December loading were concluded at $77.85 before a deal on November 5 was done for $79. Energy Publishing’s South African Steam Coal Index (SASCI) this week fell to US$79.90 – down $1.35 week-on-week and a drop of $3.65 in the last fortnight.
“I am hopeful prices won’t fall much further but I don’t think they are about to go up either,” a Beijing-based trader said. “I agree with a lot of the people I am speaking to who say prices will probably trade sideways for the next three months or so.
“But you have to have a buyer or the prices and indexes are merely academic and finding the buyers is the real challenge these days.”
An industry analyst told China Coal Report Chinese domestic production had increased by 8.2% year-on-year to the end of August which was impacting demand for imports. Hydro generation, the analyst said, had increased by 17.9% y-o-y also to August while total electricity production within the country had only grown by 4% y-o-y.
“The Chinese winter is expected to be quite mild and this is also bearish for thermal imports,” the analyst said. Coal stock at the key benchmark terminal of Qinhuangdao jumped past the 6Mt mark this week, an increase of more than 7% week-on-week while domestic thermal coal prices continue to fall.
Fenwei Energy Consulting reports domestic coal prices continue to fall steadily as they have for the last three weeks. NAR 5,500kcal/ kg product had been holding steady in price until this week when it fell to RMB635/t (US$101.65), from last week’s four month high of RMB650 ($104.05)
Another China-based trader was downright pessimistic in his assessment of current market conditions in China. “China is dead,” he offered. “The country is in a mess and it is a hard day’s work selling anything into there now.
“There is nothing which gives me confidence life will resume to normal for us traders anytime soon.
“And with Chinese buyers now insisting the discharge ports be where quality analysis is done, you are going to find more and more sellers who will want to continue having the analysis done at the load port and will just refuse to sell into China.”
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