The news of China giving verbal notice to its utilities and steel mills to stop coal imports from Australia, shook the global coal market and Australian thermal coal prices plunged by 16% in a short span of just one week.
The Australian sellers and Chinese buyers made some distressed sale of thermal coal cargoes, which led 5500 kcal/kg NAR coal prices to fall as low as $35-36/t, FoB Newcastle basis.
Taking advantage of this situation, Indian buyers especially from the cement sector made considerable bookings of Australian coal for November and December shipment.
For the cement manufacturers specially, South African and Australian coal can be used as alternate fuel source. Moreover, the landed cost of RB2 (5500 NAR) coal being higher by $6-7/t against Australian 5500 NAR coal, the latter has become an attractive option for cement manufacturers in India, and subsequently providing support to Australian thermal coal prices.
Demand from South Korea rises
Australian thermal coal is also in demand from South Korea this month. The South Korean demand for seaborne coal has been curbed this year by coal-plant restrictions during Jan-Mar, rising nuclear availability over the summer season and increasing competition from natural gas for power generation since August.
But Australian NAR 5,800 kcal/kg coal, which is a preferred grade for South Korean utilities is being made available at a wider discount against other origin coal (like Russia), thus gaining in demand in the said country.
Amid demand backup from both the countries, Australian coal prices stabilised this week and is trading at around $38-39/t, FoB Newcastle basis.
Short-term outlook
In the coming months, Australian coal mining firms are planning to extend Christmas and New Year closures this year for the first time in five years amid weak demand especially from China.
Considering, the winters season generally sees greater demand for coal, the production cut at the Australian coal mines would further strengthen the thermal coal prices by the year end.
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