12-04-2018

South African, Colombia thermal coals compete for weak Indian spot demand

Colombia origin thermal coal is increasingly being sought by traders and end-users in India to compete with South African origin coal, which has been rallying in price for several weeks now.

With the increased interest for Colombian coal in India, sellers of South African 5,500 kcal/kg NAR coal were being pressured to increase their discounts from the benchmark grade 6,000 kcal/kg NAR coal.

“It should pressure our discount, but it could also encourage Colombian sellers to increase their price and meet the spot demand,” a producer-trader of South African coal said.

The source said the supply tightness for the 5,500 kcal/kg NAR grade would likely keep a lower limit on the discount rate, which had been seen to slightly widen so far this week.

Although the possibility of Colombian coal completely displacing South African was highly unlikely, it could become a strong competitor for marginal spot cargoes, particularly while Indian demand is weaker than in previous years.

“[Colombian coal] can compete for spot cargoes because everyone likes the qualities, Colombian sellers are looking to push more volumes to Asia as well,” a European trader said.

Spot purchasing from India has been relatively limited so far this year as buyers initially withheld from purchasing at high prices, and later were looking to find a floor as prices fell during the last several weeks.

As well as this, several of the country’s largest buyers were experiencing credit issues, according to sources familiar with the matter, which further prevented any spot purchasing.

Platts FOB Richards Bay 5,500 kcal/kg NAR price was $78.50/mt Monday, up $4.95 over the last two weeks, while the equivalent FOB Colombia 5,500 kcal/kg NAR price rose less sharply to $71.50/mt, adjusted from Platts weekly FOB Colombia 6,000 kcal/kg NAR price of $78/mt, up $3 the last two weeks.

In the same period Platts CFR India West 5,500 kcal/kg NAR price rose to $92.20/mt, up $4.30.

Source: Platts

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