China Eyes Aussie Coal; Korean Supplies at Risk

Source:

"Australia's thermal coal prices defied weaker oil prices and rose 1% from a week ago."

Chinese buyers have stepped up enquiries for Australia's thermal coal in recent weeks as rising freight rates have erased the cost advantage of buying from South Africa and Colombia, trade sources said Tuesday.

Australian producers said Chinese utilities were beginning to stock up ahead of peak summer demand and many were looking to secure supplies at about $90$92/ton on a free-on-board (FOB) basis, based on coal with a heating value of 6 080 kcal/kg net as received.

Renewed import demand by China for Australian coal could steeply tip the balance in the Pacific coal market, pushing prices higher and may even force South Korean utilities to import from further afield.

"The Chinese are now very active in the market and many of the enquiries are looking to buy at least half a million tons of coal for second-half delivery," said a sales manager at a mid-sized Australian producer.

"It wouldn't be hard for them to soak up 34 million tons of Australian coal over a month. And if they do, the Korean buyers will be left high and dry."

Three large producers said they were in the midst of negotiation with Chinese buyers, with one of them saying the firm is close to sealing a deal to sell a cape-sized shipment to a Chinese utility at about $95 a ton.

Steam coal supplies in Australia have tightened considerably in recent months as many producers have changed their production mix to ship more coal into the higher-priced steelmaking market, while demand from Japan, the world's largest coal importer, has also increased.

In a sign of tight supplies, Australia's thermal coal prices defied weaker oil prices and rose 1% from a week ago to $98.82 a ton.

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