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Australian Newcastle coal prices continue to rise, despite fall in exports

19 Nov 2012 13:34:09 | csd

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Coal volumes shipped from the Australian port of Newcastle fell 13% week on week to 2.7m tonnes in the seven-day period ending 19 November, but spot prices of high-quality material rose further as short-covering across the three main global coal hubs continued.

Shipped volumes reached their highest level in five months over the seven-day period ending 12 November at 3.1m tonnes, according to data from the Newcastle Port Corporation published on Monday.

Over the course of the week ending 19 November, 31 ships entered the Newcastle port, flat to the week before. But the 31 vessels had an average waiting time of just 1.6 days, down from the 2.8 days in the previous week.

In line with a fall in shipped volumes, stocks at the two coal terminals operated by Port Waratah Coal Services at Newcastle rose by 30% week on week to 1.56m tonnes at 00:00 local time on 18 November. However, stocks are likely to fall over the week ahead because a large section of the Hunter Valley railway will be closed to traffic between 20 and 23 November.

Newcastle prices rise

Meanwhile, spot prices of Australian 6,000kCal/kg NAR physical coal rose, but fell short of increases on the FOB RB market. As a consequence, the spread between the FOB RB and FOB Newcastle February-loading cargoes inverted on Thursday morning, with one market participant suggesting Indian buyers might turn their attention to Australian coal.

On Thursday morning, February '13 FOB RB cargo changed hands at $89.00/tonne, up by $1.00/tonne day on day, while the equivalent FOB Newcastle cargo went through at $88.00/tonne, up by $0.25/tonne day on day. By Friday morning, FOB Newcastle February '13 traded at $89.00/tonne, but no equivalent FOB RB deal was recorded.

In mid-October, when spot FOB Newcastle physical levels were around $4.00/tonne below the equivalent FOB RB levels - sources said it would take time to persuade Indian buyers to buy Australian coal because it was out of their traditional supply route.

However, one trader has since said that Indian buyers could still change allegiance: "Australian coal is much better quality, and seeing as freight rates are low, there is no reason why Indian buyers would not buy Australian coal if prices fell below South African levels. Indian buyers will generally go for whatever works out cheapest."

After falling to a low at $76.00/tonne in mid-October, FOB Newcastle spot prices are now back at levels last seen at the end of September, with South Korea among the keenest buyers, according to market participants.

Tender

The Korea-based Korea East-West Power Company last week bought 670,000 tonnes of Australian coal to be delivered during January and February 2013, traders said. The company issued the tender for coal with minimum calorific value of 5,700kCal/kg for supply from Australia, Canada, South Africa, the US or Colombia at the end of October.

However, because overall Asian demand is low while supply remains ample, most market participants attributed the rises recorded across the three main coal hubs over the past three weeks to short-covering.

Japanese power generators - the main importers of 6,000kCal/kg NAR FOB Newcastle coal - imported 4.36m tonnes of coal in October, which is flat month on month, but up by 240,000 tonnes compared with the same month of the previous year, the country's Federation of Electric Power Companies (FEPC) said last Thursday. Japanese monthly coal imports have averaged 4.2m tonnes this year, and traders do not expect these figures to change going forward. MV

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