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Asian demand pummels South African, Australian July coal indices

31 Jul 2013 18:14:16 | csd

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The ICIS physical indices for South African and Australian high-grade coal slid to an all-time low as weak Asian demand and currencies pummelled international coal prices in the seaborne market.

However, a strike at a Colombian producer halted the European index's four-month run of notching new lows.

The value of FOB Newcastle cargoes of 6,000Kcal/kg NAR coal came under more pressure from Chinese domestic coal prices. The key Chinese Bohai-Rim steam coal index staggered to a five-year low in the week ending 26 July, according to ICIS C1 data, with little let up in sight.

By the end of July, Chinese buyers had either pulled bids altogether or bid much lower for 5,500Kcal/kg coal, which weighed on the 6,000Kcal/kg market.

Liquidity on the Australian market ground to a halt in the second half of the month for 6,000Kcal/kg NAR coal, with the last deal reported to ICIS on 18 July. Only eight index-qualifying deals were reported to ICIS, down from 18 a month earlier.

This was the result of producers largely pulling offers for much of the second half of July because of the relentless decline in the price of cargoes.

The ICIS FOB Newcastle for July '13 of $76.918/tonne is 8.8% the index for June. The previous low was the October '12 index, settling at $81.655/tonne.

FOB RB prices for 6,000Kcal/kg coal were pressured by weak Asian demand as well. In addition, Indian buyers were largely absent with the monsoon season affecting the ability to land vessels in the subcontinent.

The South African market was characterised by an abundance of sellers over the month, but a lack of buyers. Only 18 index-qualifying deals were reported to ICIS over July, 10 fewer than a month earlier. The decline in prices at the end of the month might open the possibility of Europe taking some coal from South Africa, with one trading house in particular offering in cargoes aggressively, sources said.

The ICIS FOB RB physical index for July of $72.80/tonne was a new low, down 6% from the June index.

However, the ICIS DES ARA index was pegged higher than a month earlier. Unionised workers at Colombia's second-largest producer Drummond downed tools on 23 July, which supported the prices of seaborne cargoes sailing into Amsterdam, Rotterdam or Antwerp.

Market participants were generally relaxed about the strike given the current oversupply, but prices were lifted all the same.

The increase in the sale of September cargoes also helped. While stocks in Europe remain high, European utilities generally start to snap up cargoes with more gusto with one eye on the coming winter. As a result, September cargoes were roughly $3-4/tonne above August-loading ones.

The ICIS DES ARA index for July was $75.597, up from $74.205/tonne a month earlier. Fionn O'Raghallaigh

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