Pacific basin coal prices tumbled more than 5% over the past week as a lack of Chinese buying activity took its toll on the market.
Broker Global Coal’s benchmark Newcastle [Australia] index was last assessed down by 5.5% on the week at USD 98.88/t.
On Monday it reached a seven-month low of USD 98.64/t.
China’s Zhengzhou front-month thermal coal futures contract settled 0.7% lower on the week at CNY 612.40/t (USD 88.44/t).
With China’s government effectively banning coal imports for customs clearance until the end of the year, spot demand was thin and available supply abundant, market participants said.
“Prices will remain weak until after Chinese New Year [in early February],” said one Singapore-based coal trader.
A coal analyst with a trading firm agreed there was unlikely to be much pick-up in Chinese demand until mid-February.
Meanwhile near-term supply should remain steady, because weather conditions in key producing countries – such as Australia and Indonesia – are likely to be drier than usual over the coming months due to the anticipated return of the El Nino weather pattern.
But despite the array of potentially bearish market drivers, participants should remain cautious, said Guillaume Perret, director of consultancy Perret Associates.
“The winter demand season is still ahead, so anything can happen now,” he said, noting low coal prices become more attractive for generators, so could spur some increase in demand.
There was already some incremental demand from India, as buyers stocked up ahead of the winter heating season, participants said.
Inventories at 122 coal-fired plants, monitored by India’s Central Electricity Authority, were assessed up 3.5% on the week to a fresh two-month high of 11.7m tonnes.
“We see a steady growth in Indian imports, despite the rise in [domestic] production. Without India, the market could be USD 5/t lower across the board,” said Perret.
“But [Indian] buyers are also happy to wait and see for now, while prices decline,” he said.
Indian coal production in the first 10 months of the year grew 10% on the year to 587.4m tonnes, according to IHS data, thereby reducing import requirements.
Source: Montel News
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