Australian thermal coal prices which were range-bound in May, observed a dramatic increase towards the end of May’21 .
Prices for the 5,500 NAR grade are currently assessed at $70/tonne (t), FoB Newcastle against $58/t seen around 23 May’21.
The reason for the sharp rise in Australian thermal coal prices was the rally in global imported coal prices, including South African and Indonesian, which pushed up athe demand for Australian coal from the ex-China markets.
Surge in global coal prices
The change in global trade dynamics after China banned Australian coal led to a distortion in global thermal coal prices. Current prices of South African coal are up by 28% compared to Jan’21 and 4% against the average price in May.
On the other hand, Indonesian thermal coal benchmark prices for Jun’21 are up by 32% against Jan’21 and by 10% on a month-on-month (m-o-m) basis.
Increased demand from ex-China markets
While China is procuring huge volumes from Indonesia, Russia and even South Africa, other coal-importing countries like Taiwan, Japan, South Korea, Vietnam and India are meeting their coal requirements from Australia, providing support to the country’s coal prices.
In addition Australian thermal coal prices surged towards the end of May amidst increased demand from Taiwan due to a recent tender of 2 million tonnes (mn t) awarded by Taiwan Taipower.
Taiwan’s power consumption is set to increase between the summer months of Jun-Sept’21 due to anticipated rise in household electricity consumption with more people working and studying from home amidst the domestic outbreak of the coronavirus.
Even Indian buyers who went slow in April and the first-half of May due to lockdown restrictions were back to booking Australian thermal coal towards the end of May, which supported the prices.
CoalMint’s vessel line-up data reveals about 1.17 mn t of Australian thermal coal will arrive at Indian ports between 1-15 June’21 against 0.93 mn t during the same period last month.
“Suddenly, there is an increased demand for Australian coal from even Japan, South Korea and Vietnam for July-August shipments amidst a warmer-than-expected summer season,” said a trader based in Singapore.
He added that despite the surged demand, prices of the 5,500 NAR Australian coal, ruling at around $73/t, FoB are cheaper than the competing South African coal which is at $85/t, FoB RBCT, offering scope of further increase in the coming days.
What lies ahead?
In the ongoing scenario, where demand for Australian thermal coal is expected to increase, especially from north-east Asia due to warmer summers there, the country’s thermal coal prices are likely to remain supported in the near future.
However, in case of India, demand is likely to suffer a marginal setback due to the upcoming monsoon season when construction activities remain halted, denting cement demand. Cement companies in India are major buyers of Australian coal.
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