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Chinese buyers default on three coal deliveries - traders

22 Nov 2012 14:55:57 | csd

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Chinese buyers have defaulted on three international physical coal deliveries, market participants reported on Thursday.

Rumours of three defaults on shipments destined for China, which spread across the market on Thursday morning, had a limited immediate effect on traded levels, but market participants said Chinese buyers are likely to reject another three capesize (150,000 tonne) vessels of international coal in the coming week, which will likely make a further dent in the already weakening price levels.

One trader pointed out that the three capesized vessels are deals with lower quality material, but others added that the message to the international coal market would be bearish either way.

"Once again prices in the international market are weakening and the Chinese traders are defaulting on deliveries. I think they are having issues with letters of credit," one trader said.

Earlier in the week a Singapore-based trader pointed out that prices rose last week on news that Chinese traders were buying spot cargoes - something which turned out to be a temporary trend by the beginning of this week.

"People got excited," he said. "Then they realised that China only had a few cargoes to buy and have now stopped bidding. Oil had fallen back off and there is still no cold weather. So coal came back off."

In addition, on Thursday one London-based physical coal trader said that Chinese buyers' bids were still $4-5/tonne below current market offers.

Distressed cargoes were offered at levels around $83.00/tonne (€64.74/tonne), but received bids of around $78-79/tonne.

"We don't know whether they were bidding lower because the cargoes were distressed or not, but we're hearing now the buyers are pulling out of previous purchases, so I would say the general trend is bearish," the trader said.

Relief for international sellers could come if the Chinese government introduces more economic stimulus measures, which could help banks establish more credit lines, the trader added. MV

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