International thermal coal prices have hit north for over three months and Australian coal too was no exception. A spike in demand from India, Pakistan and Vietnam had offset the informal ban on Australian coal by China.
In a recent update, Australian sellers have raised their 5500 NAR high-ash coal offers to the levels of $57-58/t while Indian buyers are showing interest at $54-55/t FoB. This price mismatch has led to a stalemate situation and no major deals could be concluded since past few days.
However, a trade deal of high-ash 5500 NAR grade coal has been heard at $83/t CFR basis for April shipment, up by $13/t (against last trade price), but official confirmation on the same is still awaited.
From its lows of $35-36/t in Aug’20, 5500 NAR Australian coal prices touched the levels of $50/t, FoB Newcastle by December end. The uptick continued through the New Year as demand grew in South Korea and Japan on the back a severe winter aggravated further by a shortage of LNG gas.
By the third week of Jan’21, prices reached the levels of $58/t, FoB basis. However, in February there was an ebb in Chinese demand ahead of their Lunar New Year Holidays. As a result, Australian thermal coal corrected by $6-7/t and slid down to $51-52/t. However, it seems that prices have once again moved up now amid limited offers for 5500 NAR coal being made by the Australian sellers.
Rising freight adding to buyers’ woes
Apart from the price mismatch Indian buyers are taking a step back from booking Australian coal because of rising freight charges amid acute shortage of containers.
Most of the mainline operators started raising freight charges in November because of the congestion at several ports in Europe and Southeast Asia due to pandemic induced lockdowns. This has resulted in a shortage of empty containers globally. The current freight between Australia-India is trending at $20/t for panamax vessels, which was around $13/t in Oct’20 and $16/t in early Febraury.
Expected arrival of Australian coal
CoalMint’s vessel line-up data reveals about 0.76 mn t of thermal coal is awaited from Australia between 16-23 February, while 0.69 mn t was already at berthing or anchorage position at Indian ports in the first half of Feb’ 21. With sufficient quantity arriving in India, buyers from the cement sector have taken a step back from making any fresh bookings.
Outlook
Australian coal prices are likely to see an uptrend in coming days as the Chinese New Year holidays ends this week. This is because, once the Chinese are back in the market, they would start making import bookings giving a boost to Indonesian coal prices. South African coal prices are expected to remain at elevated levels due to unavailability of locomotives in country’s rail line, Transnet. Subsequently, with other-origin coal prices being up, Australian coal would also rise as its key importers would opt for it.
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