Coal traders hopes that prices will be pushed against strong demand ahead of winter Coal restocking.
Coal prices in Asia have dropped almost 10.3 per cent since the year-low in September. Market expert hopes for significant prices rise during buying in winter season
The recent gains in Newcastle prices have outweighed those for China Coal prices, suggesting that the price advantage enjoyed by Chinese buyers on imported Coal in recent months may be eroding.
There are some bullish short-term factors, with inventories at one of the major Chinese port Qinhuangdao, down to the lowest level since May.
Rising prices in Europe on the back of supply disruptions in Colombia and South Africa will also spill over on Asia, especially since South Africa acts as a swing supplier between Europe and Asia.
Market traders are anticipating that “these are short-term factors that may not boost prices on a sustained basis over winter. However to see the Coal price rise, Asia’s major buyers will have to demand more Coal, but, with the exception of India, it appears they may have adequate stocks available”
Currently China’s overall inventory is at around 300 MnT, near record high levels. Also, stocks at major Power plants are enough level of 21 days consumption.
However China seems interested in buying Indonesian Coal, as mentioned by the trader.
Unless the winter is colder than the forecast, it seems unlikely that there will be rush for Coal supplies, meaning that the Newcastle price may struggle to rally around USD 90 per MT.
Currently the spot price of Coal at Australia’s 6000 NAR Kcal/kg reached at USD 84.63/MT at the end of week 46 from bottomed price on week 36 at USD 76.70/MT.
During the last two northern winters in China, the price has peaked in late January to early February before falling back as the cold weather eases the Coal prices.
Last winter prices rose 18.9 per cent from the low in October to the February peak, and the year before that they gained 10.8 per cent.
And so it expected by market that there is still some scope for spot prices to rise further in the next two months, but there are some factors that make a strong rally unlikely.
Much will depend on Chinese imports and the level of domestic prices. As China has improved its capacity to move domestic Coal by rail and ship, domestic prices have effectively been leading seaborne prices as international producers are forced to compete with local miners.
The domestic price has been gaining in recent weeks, with the Bohai Bay Rim Steam Coal Index rising to CNY 590 per MT last week from prior week’s price CNY 585 per MT.
Experts say that “Chinese domestic market isn’t expecting a shortage of Coal over winter.”
Chinas Coal output rose by 1.6 per cent to 320 MnT in October from the same month last year, according to China Coal Transport and Distribution Association.
This brought production for the first 10 months to 3.1 BnT, down by 0.3% from the same period in 2012.
Domestic output has been largely steady, imports have grown strongly. Custom figures shows, China bought 196.65 MnT in the first 9 months of the year, a gain of 18.6 per cent.
Imports gained 17.3 per cent and totaled 260 MnT in 10 months to October.
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