Source: Platts Coal Trader International, May 31, 2013
Speculation was rife Thursday that China’s National Energy Administration (NEA) might have reached an agreement with the country’s power utilities to impose a ban on low calorific value coal imports, but with tweaks to the initially proposed clauses.
A source at a major Indonesian thermal coal producer said that his Chinese sources were indicating that NEA and power utilities had agreed to impose a ban on the import of coal with a heating value lower than 3,750 kcal/kg NAR coal, down from the initially proposed 4,540 kcal/kg NAR coal.
NEA had also apparently revised upwards the sulfur level to 2% from 1% for coal cargoes to be considered for rejection, while the ash level considered for the possible ban remained at 25%.
Platts could not immediately confirm this development and a wide range of market players were unaware of this possible update.
The producer source said that his Chinese sources were indicating that the ban would in all likelihood be implemented by the end of June or early July. But he said that it was not immediately clear whether it would apply to existing contracts for low CV coal.
In the case of the ban being applied to only new contracts, he expected a number of Chinese buyers to enter into long-term contracts for low CV coal before it came into force. He said if the latest development was indeed confirmed, then it meant that cargoes below 4,200 kcal/kg GAR coal would be affected. “That would not have a major impact on thermal coal prices, as most of the coal in that grade goes to India,” he said. A Dubai-based trader said he had heard similar details from fellow traders but had received no official confirmation either.
The producer source said that talk of the possible ban had already pushed up higher CV Indonesian coal prices in recent days. However, other sources remain skeptical about the introduction of the ban. “Nearly half of the Chinese market participants think that this ban won’t be implemented,” a Singapore-based trader said, adding that China could, however, move to ban highsulfur, high-ash cargoes. He noted that high-ash Australian 5,500 kcal/kg NAR prices were strengthening for July-loading cargoes, amid higher offers and bids being heard in the market.
For July, Capesize cargoes of Australian 5,500 kcal/kg NAR coal were being offered at $84-84.50/mt CFR south China, while bids were at $83/mt CFR, he noted. However, June offer prices for similar cargoes were as low as $82.50/mt CFR. A second Singapore-based trader indicated July marketvalue was around $83.50/mt CFR, with June offers at $82.50/mt and bids at $81.50/mt CFR.
Distressed cargoes
The first Singapore-based trader noted that some distressed cargoes were putting pressure on June prices. A Capesize cargo of Australian 5,500 kcal/kg NAR coal had been reportedly left “distressed” at the anchorage of a China port, but it had yet to find a buyer as the supplier was not willing to lower his offer price, he added.
On Wednesday, Platts reported that a defaulted Capesize cargo of 5,500 kcal/kg NAR South African coal was being offered into the Chinese market at $83.50/mt CFR south China. The second Singapore-based trader said that a couple of apparently new defaults were being heard in the Australian market. He reported that two Newcastle 5,500 kcal/kg NAR cargoes from major producers — one that was currently loading and one that was on the water — had very recently been reoffered in the market.
Expecting some macroeconomic stimulus measures to be announced shortly by the China government, a Shandong based trader noted that his company would book some high-CV Australian coal for deliveries in July-August.
Offers of 5,500 kcal/kg NAR Australian coal have been scant in the Chinese market, sources noted. The trader noted that a mini-Capesize cargo of 5,500 kcal/kg NAR Australian coal was available at $83.50/mt CFR South China for July delivery, but he was trying to bring down the price to below $83/mt CFR Rizhao Port in eastern China’s Shandong Province.
A half-Capesize cargo of 5,300 kcal/kg NAR South African coal, with about 10% volatile matter, was being offered at $79.50/mt CFR Rizhao Port for June delivery, but had yet to lock in any Chinese buyer due to its low-VM content. The half-Capesize cargo was first offered at $80.50/mt CFR Rizhao Port last week.
In comparison, domestic 5,500 kcal/kg NAR thermal coal is available at about Yuan 590-600/mt mt, or Yuan 504-513/mt without VAT, FOB Qinhuangdao, down by about Yuan 5/mt from earlier this week. At Guangzhou Port, similar material is available at about Yuan 630/mt, or Yuan 538/mt without VAT, on a CFR basis, unchanged over the week.
Platts assessed the CFR China price for cargoes of 5,500 kcal/kg NAR thermal coal for shipment to south China ports in the next 15-60 day period at $83.50/mt, unchanged on-day. Typical 20% ash Newcastle 5,500 kcal/kg NAR thermal coal for loading in the next 7-45 day period was assessed at $75.35/mt, stable on-day, while FOB Qinhuangdao 5,500 kcal/kg NAR coal prices were assessed at Yuan 507/mt, down Yuan 1 on-day.
Buyers hold out for clarity
Buyers in the Asia-Pacific market, specifically Chinabased, continued to wait for clarification on the potential ban before conducting any fresh business. “We are not going to ink any import deal in the next couple of weeks,” a Shandong-based-trader said, adding: “It is very easy to overestimate downstream coal demand in a well supplied imported coal market.”
Coal stocks at local power plants in Shandong Province are able to last for at least 20 days of coal burn, he noted, adding that local utilities are not keen on stocking coal yet. A Panamax cargo of 5,200 kcal/kg NAR Indonesian coal with 1.5% sulfur was being offered into the Chinese market at $68/mt FOB for June delivery but had yet to attract any Chinese buying interest due to its high-sulfur content. However, some other Chinese buyers continued to conclude deals for lower CV Indonesian coal.
A Beijing-based trader said he had booked Panamax cargoes of 4,200 kcal/kg GAR Indonesian coal at around $52/mt CFR south China earlier this month for June-delivery and was looking to book additional cargoes of the same grade for July-delivery at the same price. A 50,000 mt cargo of 4,200 kcal/kg GAR Indonesian coal was being offered at $44/mt FOB for early-July delivery, according to a third Singapore-based trader. With Supramax freight rate of $9/mt, the offer worked out to $53/mt CFR south China on a delivered basis. A Liaoning-based trader noted that some of his utility customers are looking for medium CV Indonesian coal, but they would only pay about $59-60/mt FOB for 4,700 kcal/kg NAR low-sulfur Indonesian coal cargoes.
US cargoes were also being offered into the Chinese market, sources said. The Beijing-based trader was considering booking a Capesize cargo of 5,400 kcal/kg NAR US coal at around $82.60/mt CFR east China for mid-June delivery and was currently in discussions with the seller to close a deal. Meanwhile, a Capesize cargo of 5,900 kcal/kg NAR US coal with 3% sulfur was being offered into the Chinese market at $54/mt FOB, or about $85/mt CFR, for July delivery, but was met with little Chinese buying interest.
Platts assessed the daily price of FOB Kalimantan 3,800 kcal/kg GAR coal for loading in the next 7-45 days at $36.60/mt, and 4,200 kcal/kg GAR coal at $42.90/mt, both unchanged on-day. Platts also assessed the price of FOB Kalimantan 5,900 kcal/kg GAR coal for loading in the next 90-day period at $73.80/mt, up 10 cents on-day, while FOB Kalimantan 5,000 kcal/kg GAR for the same delivery period was assessed at $60.40/mt, unchanged on-day.
— Deepak Kannan, Reggie Le, Jingtai Lun