- Warmer season outlook backs demand from South Korea.
- Localised lockdowns and costlier pet coke lift Indian demand.
Australian thermal coal prices moved up by $2-3/tonne (t) this week amid increasing demand for high-calorific value (CV) coal from South Korea. Currently, prices for high-ash 5,500 NAR Australian coals are assessed at $58/t, against $55/t seen a few days back.
There is strong demand for high-CV thermal coal from South Korea due to the unseasonably warm season outlook in north-east Asia in June-July. Also, the supply for high-CV thermal coal has become quite tight this year as the trade dynamics in the global market have changed a lot.
After the informal ban by China on Australian coals in the second half of CY’20, the former started looking for alternatives from Indonesia, Russia, and South Africa, resulting in lower availability of high-CV coal from these countries which escalated thermal coal prices.
In addition to supply constraints, thenuclear availability in South Korea is low this year, resulting in increased coal-fired power generation. A total of seven reactors with a combined capacity of 6.9 gigawatts (GW) are currently offline, which account for 30% of South Korea’s overall capacity of 23.3 GW across 24 nuclear reactors.
Pick-up in Indian demand
In India, demand for Australian thermal coal has picked up since the past few days. As per CoalMint’s vessel line-up data, 1.37 million tonnes (mn t) of Australian thermal coal would be arriving at Indian ports between 17-27, May’21.
The lockdowns announced this year to curb the spread of coronavirus in India after Mar’21 are more localised, hence the impact of these on cement manufacturing is not as grave as last year. However, the only factor that deterred importers from buying Australian thermal coal is resilient ocean freights.
In addition, Australian thermal coal demand is getting support from Indian cement manufacturers due to escalated pet coke prices. Australian thermal coal is being used as an alternate to pet coke by cement producers since last year when the former’s prices dropped to as low as $37/t, FoB Newcastle.
The current price for the U.S.-origin high sulphur (6.5%) pet coke is hovering around $130/t CNF India, which is 4% costlier than the 5,500 NAR Australian thermal coal on a per CV basis.
In an unconfirmed deal, a capesize vessel of 5,500 NAR Australian thermal coal is heard to have been booked at $77/t, FoB India for June loading.
What lies ahead?
Amidst escalating South African and Indonesian coal prices, and anticipation of correction in freight rates in the coming days, demand for Australian thermal coal from India is set to increase as well as from South Korea.
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