More Chinese thermal coal buyers may renege on contracts for imported thermal coal shipments as international prices continue to slide, sources said Tuesday.
"All the [thermal coal] prices have come down and so some reports of Chinese defaults are emerging," a Singapore-based trader said.
Rumors were afloat on Tuesday that Chinese buyers apparently refused to take deliveries of three Capesize or baby-Capesize cargoes of Australian 5,500 kcal/kg NAR coal, according to three sources, but they could not provide further details. Platts also could not immediately confirm this.
"It didn't take too long for the price of 5,500 kcal/kg NAR seaborne coal to fall from $84/mt CFR to the present level of $79/mt CFR. Default happens when price falls so fast," a Beijing-based trader said.
"That's why we are trying to push the price as low as we can. No one knows how fast the Chinese market will fall between the time the cargo is booked and the time it is delivered," a Shandong-based trader said.
Higher-ash Newcastle 5,500 kcal/kg NAR coal was being offered at an indicative price of $69/mt FOB, while bids were at $68.50/mt FOB for February loading, as heard through broker Marex Spectron.
A Shanghai-based trader was offered some Capesize cargoes of 5,500 kcal/kg NAR Australian or South African coal at $80/mt CFR south China for March delivery.
"It's too risky to book March cargo now unless it's less than $75/mt CFR," said the trader, expecting the weak domestic thermal coal price to further dampen the market for seaborne material.
The Beijing-based trader also received offers for 5,500 kcal/kg NAR Australian coal at $79-80/mt CFR for March or April arrival. He bid at $78/mt.
"Currently suppliers are not willing to meet our bid but they will offer at lower level [in the near term]," he said, adding that prices of imported 5,500 kcal/kg NAR coal might fall to as low as $78/mt in a week's time. DOMESTIC PRICES WEIGH
Expecting Chinese thermal coal prices to slip further, Chinese traders have either postponed or cancelled purchase plans for overseas thermal coal for the first and early second-quarter shipments, sources said.
"Our purchase plans will depend on the prices of March-April delivered cargoes," a Singapore-based Chinese trader said, adding that his bidding interest will be about $78-78.50/mt CFR southern China for cargoes of imported 5,500 kcal/kg NAR coal.
Offers for March-April delivered mini-Capesize cargoes of 5,500 kcal/kg NAR Australian thermal coal, however, have remained about $69-70/mt FOB, or about $80.50-81.50/mt CFR.
A Shandong-based trader is considering booking some cargoes of 5,500 kcal/kg NAR Australian or South African thermal coal for deliveries from March onwards at about $67/mt FOB or lower.
"We do not have specific purchase plans for March or April yet," a Guangdong-based trader said, adding: "The market sentiment is getting so low that we may have to exercise more caution."
A second Shandong-based trader has just re-sold a January-delivered mini-Capesize cargo of 5,500 kcal/kg NAR Australian thermal coal at about Yuan 595/mt [$98.47], or Yuan 509/mt without VAT, CFR to a local utility.
"We have got some more of such January-delivered material, but now it is getting all the more difficult to sell," he said.
For comparison, domestic 5,500 kcal/kg NAR thermal coal is now transactable at about Yuan 580-590/mt, or Yuan 496-504/mt without VAT, FOB Qinhuangdao Port, down by about Yuan 5/mt on-day and still with a downward bias.
Many Chinese traders expected domestic thermal coal prices to continue to drop in the coming two months.
"There is no reason for the price to rebound," a second Guangdong-based trader said. "Electricity demand will not be as strong as in winter."
The trader recently booked some 5,500 kcal/kg NAR domestic coal at Yuan 585/mt FOB Qinhuangdao for prompt delivery. The bearish outlook for the Chinese market also discouraged him from buying any seaborne cargoes.
At the close of Asia trade Tuesday, the Platts/Fenwei China Coal Index (CCI 1) for domestic thermal coal traded at Qinhuangdao port was assessed at Yuan 583/mt inclusive of VAT, down Yuan 2 from Monday close.
Platts assessed the FOB Qinhuangdao 5,500 kcal/kg NAR coal for delivery in the next 7-45 days at Yuan 495/mt, down Yuan 2 on-day.
The CFR South China (CCI 8)price was assessed at $80/mt basis 5,500 kcal/kg NAR excluding Chinese VAT, down 80 cents on-day.
Platts price assessment for cargoes of 5,500 kcal/kg NAR coal for arrival in south China ports in the next 15-60 days was at $80.20/mt CFR, down 80 cents on-day.
Typical 20% ash Newcastle 5,500 kcal/kg NAR coal for loading in the next 7-45 days was assessed at $69.20/mt FOB, down 20 cents on-day.
