Inquiries for Newcastle 5,500 kcal/kg NAR higher ash thermal coal have picked up, but deals are not being finalized because Chinese buyers are only interested in testing market prices for spot cargoes, sources said Tuesday.
"This is inquisitiveness on the part of Chinese buyers to assess current market levels, so there has been a pick-up in inquiries," a Singapore-based trader said.
No deals for higher-ash Newcastle 5,500 kcal/kg NAR coal were reported Tuesday, but sources said bids and offers were largely unchanged from Monday. Platts assessed the price of Newcastle thermal coal with a calorific value of 5,500 kcal/kg NAR and typical ash of 20%, normalized from 17-23%, and for loading in the next 7-45 day period at $74.75/mt FOB, down 10 cents from Monday, mainly due to a lower ash-differential price.
Platts on Tuesday calculated the ash differential price at 80 cents, down 2 cents on-day, based on recent purchase transactions in the South Korean tender business.
The Singapore-based source said he was in discussions to sell a Capesize cargo of Newcastle higher ash coal, with Chinese buyers bidding at $82/mt CFR south China and an Australian producer offering at $84/mt CFR.
"Even if a deal is closed, it leaves traders like us with no margins," he said, adding that he estimated the Capesize freight rate from Newcastle to South China to be $10.50/mt.
Some ports like Newcastle have higher port charges and hence freight rates are a little expensive, he said.
A second Singapore-based trader said Chinese buyers were bidding for an October-loading cargo at $71/mt FOB, with offers at $74/mt FOB, and he expected a transaction would likely close at around $72/mt FOB.
"There is still a $2-3 gap between the bid and the offer prices, hence it's a bit difficult to close a deal," the first Singapore-based source said.
However, a third Singapore-based trader source said buying interest from China had picked up this week, with bids heard at $72.75/mt FOB and offers at $73.50/mt FOB, adding that deals were close to being finalized.
CHINESE MARKET OVERSUPPLIED
Major Chinese thermal coal producers have been consistently raising production by nearly 7-8% year-on-year, a fourth Singapore-based trader said, adding that Chinese buyers had the option to buy 5,500 kcal/kg NAR coal from even South Africa and Indonesia.
"I do not see any fundamental changes in the [Chinese thermal coal] market despite a rise in inquiries. I would like to see a few more indications before concluding that demand has indeed picked up," he said.
There is not much incentive for Chinese buyers to import coal because domestic coal is available at similar prices to imported material, sources said.
The fourth Singapore-based source estimated Chinese domestic 5,500 kcal/kg NAR coal at $83-$84/mt CFR Qinhuangdao, while a fifth Singapore-based trader source pegged the domestic price at around $83/mt CFR.
Even Indian interest for buying 5,500 kcal/kg NAR coal was more tilted toward South Africa's Richards Bay market rather than Newcastle, an India-based trader source said.
Indian buyers would be interested in South African 5,500 kcal/kg NAR coal at index-linked prices with a discount of about 5-6%, he added.
Meanwhile, in the on-screen market Tuesday, a 25,000 mt parcel of Newcastle 6,000 kcal/kg NAR thermal coal for loading in December traded at $91.75/mt FOB through globalCOAL during the Asian trading session.
On Friday, two December-loading cargoes were traded at $91.40/mt FOB and $91.65/mt FOB.
