COLUMN-Soaring coal prices divide Asian buyers into rich and poor: Russell


Band Clyde Russell

LAUNCESTON, Australia, September 27 (Reuters)As coal transported by sea in Asia is trading at or near record highs, there are early signs of demand destruction, especially among price-sensitive buyers such as India.

While the global volumes of marine coal have tended to increase in recent months, the market is increasingly divided between importers willing to pay the high prices and those reducing the number of cargoes they buy.

The total volume of exports of all grades of coal in the world for September is estimated at 122.8 million tonnes by commodity consultants Kpler, the strongest month since December 2019.

But examining the country distribution of imports in recent months shows the effect of soaring prices for both thermal coal, used in power plants, and coking coal, used to make fuel. ‘steel.

India, the world’s second largest importer of coal behind China, is expected to land 13.3 million tonnes in September according to Kpler, which would be the lowest monthly result since June 2020, when imports fell due to the economic blow of the blockages to fight the coronavirus pandemic.

If September’s result is in line with Kpler’s estimate, it will be the fourth consecutive month of declining imports and put September’s Indian imports around 38% below April’s 21.6 million tonnes. highest in 2021.

India’s distribution of where it purchases its coal also shows the impact of rising prices, with Indonesia taking a larger share to the detriment of Australia.

Indonesian thermal coal trades at a lower price than Australia, but also has a lower energy value.

India is on track to import 3.8 million tonnes of all grades of coal from Australia in September, up from 4.79 million in August and 6.4 million in July.

Imports from Indonesia are expected to reach 5.09 million tonnes in September, up from 4.3 million in August and 3.34 million in August, according to Kpler.

Indonesian coal demand is manifested in prices, with the weekly coal index having an energy value of 4,200 kilocalories per kilogram (kcal / kg) IDIDX42GRW1 = ARG, as valued by commodity price news agency Argus, hitting a new record high of $ 91.28 per tonne in the week to September 24.

This grade has now gained 303% from its 2020 low of $ 22.63 per tonne, reached in early September of the same year.

Australian benchmark thermal coal with an energy value of 6000 kcal / kg ARGMCCINDX = ARG, also rose last week, reaching $ 180.70 per tonne, approaching its all-time high of $ 195.25 since July 2008.

The price has gained 290% from its 2020 low of $ 46.37 per tonne, also in early September.

High quality Australian coal is mainly purchased by utilities in Japan, South Korea and Taiwan, and is not a popular quality for Indian importers.

India tends to buy 5,500 kcal / kg of Australian coal API5IDXWKY = ARG, which finished last week at $ 108.20 a tonne, up 208% from its 2020 low of $ 35.06 reached in August of the same year.

AUSTRALIAN BAN

This quality was mainly bought by China, but trade came to a halt after Beijing imposed an informal ban on Australian coal in the middle of last year amid a political dispute.

The effective ban proved costly for China, which was forced to buy more Indonesian and Russian coal to meet needs, as Russian cargoes declared by traders premiums of more than 100% over their costs. Australian equivalents.

China’s coal imports are expected to decline in September, with Kpler forecasting sea arrivals of 27.4 million tonnes, from 32.4 million in August and 27.65 million in July.

This more likely reflects the lack of available cargoes rather than a reduction due to high prices, especially as Chinese buyers now compete with India for Indonesian coal.

Chinese imports from Indonesia are estimated at 15.86 million tonnes in September, up from 19.8 million in August.

If China and India, the two main buyers of coal, import less, as do other smaller Asian importers like Vietnam, then the question is who imports more.

The answer lies in the richest and most developed economies of North Asia, namely Japan, South Korea and Taiwan.

Japanese imports in September of all grades of coal are expected to reach 16.24 million tonnes, the highest since January 2020, while South Korea is set to import 13.05 million, the highest since October 2019 , and Taiwan is expected to bring in 8.02 million tonnes, the most since Kpler started tracking shipments in January 2017.

The question for the market is how long these countries will pay high prices for coal, or whether they will be able to switch to now cheaper oil production, or use liquefied natural gas (LNG). bought on long-term contracts linked to crude. or even increase the share of nuclear power.

Thermal coal imports for China, Japan, India https://tmsnrt.rs/3CO4ws9

(Edited by Robert Birsel)

(([email protected]) (+ 61 437 622 448) (Reuters messages: [email protected]))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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