09-08-2017

US-to-Asia coal exports could face downward pressure: Banchero Costa

Coal

The US' role as a swing supplier into the Asian coal markets could be tested as the market regains its balance, a dry cargo chartering firm said Monday.

Higher seaborne thermal coal prices have been driven largely by strong ongoing demand from China, which increased its US coal shipments to 1.6 million mt from just 113,185 mt over the year-ago period.

"With China's coal output on the rise, Chinese hydropower output likely to recover from weather-related restrictions, and damage from the cyclone repaired in Australia, both coal prices and US shipments could soon face downward pressure," global research firm Banchero Costa group said in a weekly report.

US suppliers took advantage of supply disruptions out of Australia, increased Chinese demand and higher prices to send 13.2 million mt to India, China, South Korea and Japan over the first six months of the year, up 95% from a year-ago, according to US Census Bureau data. Those four Asian nations received 33% of total US exports, up from 26% of total US coal exports in the same year-ago period.

Australian and Indonesian coals remain the most competitive in terms of production and freight costs for Asian customers, the firm said.

"Considering how US coal exports are currently propped up by high coal prices, rather than any production or freight cost advantages, US exports are expected to be most affected should coal prices moderate," the firm said.

Australian thermal coal prices grew more buoyant at the same time as US exports were increasing with FOB Newcastle 6,300 kcal/kg GAR 7-45 day prices averaging $80.70/mt over the first six months of the year, up from $51.90/mt over the same period in 2016.

S&P Global Platts assessed the FOB Newcastle physical price at $97.20/mt Monday, down $1.80 from Friday.

The Netherlands received the highest amount of US coal received among export destinations over the six-month period, totaling 4.4 million mt, but was down 1.4% from the same six-month period a year ago.

By comparison, US coal shipments to India totaled 3.8 million mt, up 15.9% from the year-ago period; Japan received 3.6 million mt, up 117%; and South Korea received 4.1 million mt, up 148%.

Through June, 64% of the US coal shipments to Asia originated from the east coast ports of Baltimore and Norfolk, Virginia. A deal was heard last week for a 130,000 Capesize vessel of Northern Appalachia coal at $65/mt FOB Baltimore. The cargo was destined for India.

Seattle was the third-largest port of origination, totaling 2.5 million mt over the first six months, compared with just 70,310 mt in the year-ago period.

Sourcec: Platts 

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