Sellers raised their offer prices in the high ash Newcastle market Tuesday, spurred on by a slight weakening of vessel freight costs between eastern Australia to south China, said market sources.
Australian 5,500 kcal/kg net as-received cargoes were offered to buyers at $71/mt FOB for November shipment and $72/mt for December loading, though market participants said the response from Asian buyers was muted. "Offers for Newcastle high ash are rising because freight has subsided," said one market participant.
Another said that sellers of Australian high ash coal were using a weakening freight market to their advantage.
Freight costs on a Capesize vessel for the 17-day voyage from eastern Australia to south China were put at $14.50-15/mt in Tuesday's market, slightly lower than one week ago.
Buyers did not appear interested in following offer prices higher, and bids for FOB Newcastle 5,500 kcal/kg NAR and maximum 23% ash cargoes for late November and December loading stalled at $70.50-71/mt FOB.
Newcastle 5,500 kcal/kg NAR coal for loading in the second half of November was heard bid at $70.50/mt FOB, and December cargoes were bid at $71.25/mt through Marex Spectron in the Asian trading session Tuesday and were largely unchanged on Monday.
Cargoes of higher ash coal were offered at $70.50-71.25/mt FOB for December on globalCOAL, and were stable from the previous day.
Some speculative buying interest was heard from China for December-loading cargoes of Newcastle high ash thermal coal at prices in the mid-to-high $60s/mt FOB, as buyers took CFR south China prices net of Capesize freight as their reference point for FOB prices.
Delivered south China prices for 5,500 kcal/kg NAR thermal coal were hovering around $84/mt CFR basis in Tuesday's spot market.
"It is difficult to get buyers to firm up their bids," said one participant in the Asian market.
Demand-side bids were generally seen to be $2/mt below where traders saw fair market value for Australian high ash shipments.
Platts assessed the price of FOB Newcastle 5,500 kcal/kg NAR and 20% ash thermal coal for loading in the next 7-45 day period at $70.50/mt, and up 25 cents on-day. EL NINO FORECAST
Chinese buyers were said to have switched their attention away from Australian high ash cargoes toward relatively low calorific value Indonesian thermal coal ranging between 3,400 and 3,600 kcal/kg NAR.
One market participant said this was the first time he had seen Indonesian thermal coal of this quality become interesting to Chinese buyers. Traders were hard pressed to identify any signs of optimism or factors that could turn the market around.
Weather-related impacts, such as the possibility of heavy rainfall during Australia's annual cyclone season which generally runs from December to March each year, were discussed.
"Prices will go lower because there hasn't been any extra demand and supply has been going up," said a trader.
The Australian Bureau of Meteorology in an October bulletin on its website forecast a "wetter than normal season is more likely for large parts of northern and central Australia," referring to the Northern Territory and western Queensland, which is away from Queensland's eastern ports and coal producing areas.
Pacific Ocean sea temperatures have fallen to neutral levels from warmer El Nino thresholds over the past few weeks, and are forecast by the bureau to stay this way for the rest of 2012 and into early 2013.
El Nino is a weather phenomenon relating to warmer surface temperatures on the Pacific Ocean and can lead to increased cyclone activity.
GlobalCOAL's screen-traded contract for Newcastle 6,000 kcal/kg NAR was bid around levels of Friday's two physical trades at $79.25/mt FOB for December cargoes to an offer at $80.50/mt.
January and February shipments of standard grade Newcastle thermal coal attracted bid-offer spreads of $83-85.50/mt FOB and $84.50-86/mt, respectively.
