Seaborne coal prices under pressure as demand softens in China
Thursday, April 16th, 2020
Worrying signs are emerging for coal exporters to the world’s biggest markets in Asia, as top buyers China and India move to favour domestic supplies over seaborne imports.
The prices of higher-grade Australian thermal coal, lower-rank Indonesian thermal coal, and Australian coking coal used in steel-making have come under pressure in recent days, amid signs demand may be easing.
Vessel tracking and port data compiled by Refinitiv suggests a slowing in cargo offloadings in top importer China, number two buyer India and third-ranked Japan in the first half of April, both from March and the year-earlier month.While April is historically a slower month for seaborne coal imports, falling in the shoulder season between peak winter and summer power demand, this year the picture has been clouded by the economic fallout caused by the new coronavirus.
China, where the coronavirus originated, was the first country to lock down much of its economy and is currently the first to try and restart activity.
But Chinese domestic coal prices have fallen in recent weeks, with the SteelHome benchmark price at Qinhuangdao SH-QHA-TRMCOAL slipping 13.6% from its peak so far in 2020 of 573 yuan ($80.99) a tonne on Feb. 26 to 473 yuan on Wednesday.
Importantly, this is below the informal price range the government sets for domestic thermal coal of 500 yuan to 580 yuan a tonne.
This means that the authorities may once again encourage traders and power plants to limit thermal coal imports, in order to boost domestic demand and prices.
This is likely to be more of an issue for May and June seaborne cargoes, but there are already some early signs of lower Chinese imports.
In the first 15 days of April 8.7 million tonnes of coal was discharged at Chinese ports, according to Refinitiv data, a rate that if maintained would see full-month imports of around 17.4 million tonnes.
While the final number may well be higher as more ships are tracked, it would appear that China’s seaborne imports in April may fall short of March’s total of 23.4 million tonnes, and the 21.1 million from April last year.https://www.reuters.com/article/column-russell-coal-asia/column-seaborne-coal-prices-under-pressure-as-demand-softens-in-china-india-russell-idUSL3N2C41DX?rpc=401&