Chinese buying interest was mostly concentrated on cargoes of lower calorific value thermal coal from Indonesia Wednesday, as traders expressed fears that another decline in domestic thermal coal prices was not far away and could have a destabilizing effect on Chinese spot demand.
Cargoes of 5,500 kcal/kg net-as-received thermal coal destined for south China were steady in price Wednesday for a fourth consecutive day at $82.75/mt CFR, and traders reported seeing barely any activity on the Chinese buy-side of the market.
"Buying interest is going lower, and starting bids are at $82.50/mt CFR China. It is very difficult to close any deals," said one market participant in Singapore.
"We have decided not to buy any spot overseas coal for the time being," a Guangdong-based trader said, adding that his firm would focus instead on term contract deals.
Freight costs for coal shippers have plateaued after rallying recently, and Capesize vessel freight was quoted in the market for CFR China cargoes from Australia at $11/mt, and at $12.25/mt for South Africa-origin coal.
Bids on a CFR south China basis for 5,500 kcal/kg NAR Australian and South African cargoes for April arrival were heard at $82.25-82.50/mt to offers at $82.75-83/mt through broker Marex Spectron.
May arrival shipments to south China from Richards Bay and Newcastle were bid at $81.75-82.25/mt CFR to offers at $82.25-82.75/mt, again through Marex Spectron.
A June-loading Panamax cargo of high ash Australian coal was heard offered at just under $73/mt FOB, and a Capesize at $73.75/mt, though closer in, FOB prices for maximum 23% cargoes were stable at $72.75-73.25/mt for April and May shipment, the broker said.
Sell-side offers for Australian and South African spot cargoes have become less available, traders said.
"The spot market is quite tight, and a good number of buyers are looking for April- and May-loading cargoes, but these have mostly been done," said the first market participant.
Some coal producers were less willing to offer cargoes until there was an outcome to talks in Japan to settle April dated annual supply contracts for power utilities.
"A number of coal producers are concentrating on the Japanese negotiations. When they are out of the way, they can start to look at the market again and sell their tons more aggressively," said a trader in Singapore.
trade went through Wednesday"s Asian trading window for 25,000 mt of Newcastle 6,000 kcal/kg NAR thermal coal for June loading at $88.75/mt FOB, following a similar-sized trade on globalCOAL Tuesday at $88.50/mt for May.
Prices for thermal coal at Qinhuangdao port were stable Wednesday at Yuan 512/mt ($82.30/mt) FOB, but several market sources reported hearing that the domestic market was vulnerable to another correction.
A Shanghai-based trader said he unsuccessfully offered some Shanxi domestic 5,500 kcal/kg NAR coal to a Chinese utility buyer at Yuan 521/mt FOB Bohai ports this month, and Yuan 5/mt lower a month ago.
"Many of the mines in Shanxi have lowered their prices at the pithead. Coal mines are under great pressure," the Chinese trader said, as he expressed uncertainty about the market's direction two months out.
"We can only hope power plants become more active and start to restock by mid-April," he said.
Indonesian lower cv coal was getting some Chinese interest.
"Low rank coal is getting some support from buyers. There are some desperate buyers with their vessels waiting [at Indonesian ports] and they are ready to conclude deals at higher prices," said one market source.
However, Chinese buyers were ready to pay only up to $39/mt FOB for such cargoes, a Singapore-based trader said.
China does not usually buy many cargoes of 3,800 kcal/kg GAR coal,and offer prices for this grade have shot up to $37-38.50/mt FOB depending on geared or gearless vessel loading basis, he added.
"[Chinese buyers] are convinced that Indonesian sellers will have to readjust their prices to international market conditions, depending on when the [Indian] monsoon starts to kick in," he said.
