Coal news and updates

Buoyancy in Richards Bay and European prices spreads to Newcastle coal market

Strength in the Richards Bay 6,000 kcal/kg NAR physical and paper markets for thermal coal has apparently transferred to the Newcastle 6,000 kcal/kg NAR cargo and derivative markets which have also traded higher this week, market sources said Wednesday.

Screen-traded Newcastle thermal coal has rallied several dollars since trading at a recent low of $80.25/mt FOB, basis 6,000 kcal/kg NAR for December delivery on October 14, according to globalCOAL data.

In Asia trade Wednesday, a 25,000 mt parcel of December-loading Newcastle 6,000 kcal/kg NAR thermal coal was bid onscreen at $83.20/mt FOB to an offer at $84.50/mt, and two trades for this month and quality were concluded Tuesday at $84/mt FOB Newcastle on globalCOAL.

Market participants contacted by Platts expressed some surprise with the rise in Newcastle thermal coal prices.

"Quite a few physical parcels have been sold at $84/mt FOB Newcastle recently, and Richards Bay prices have been shooting up since the middle of September without any change to market fundamentals," said one trader.

Absent any colder weather, Japanese demand for Newcastle 6,000 kcal/kg NAR thermal coal has been consistently steady during October, he said.

"Japan has started restocking a little for the winter season, but the quantity is not much," said the market source.

Japan purchases around half of the thermal coal shipped from Newcastle's Port Waratah Coal Services' terminals, about 4.5 million mt each month, according to PWCS data.

A counter-point to this argument was that the recent October-year contract price settlement in Japan at $85.80/mt FOB Newcastle, basis 6,322 kcal/kg GAR, (roughly equivalent to 6,000 kcal/kg NAR) between Japanese utility Tohoku Electric and Australian coal producer Glencore had injected some support into Newcastle coal spot prices.

Another trader said bullish sentiment in the Richards Bay and European thermal coal markets was spilling over into the Newcastle thermal coal market and was pulling Australian FOB prices higher.

Index-linked trades were a reliable indicator of the balance of supply and demand in the market he said.

Newcastle 6,000 kcal/kg NAR thermal coal trades on this basis were going through at a discount of around $2/mt to FOB Newcastle index prices, and this was indicative of "an oversupply of physical tons," he said.

Some traders in the market linked the rally in FOB Newcastle 6,000 kcal/kg NAR spot prices to a surge in European delivered and Richards Bay prices in the past few weeks.

South African 6,000 kcal/kg NAR prices hit a five-month high Tuesday at $83/mt FOB for physical cargoes loading in the next 7-45 days, and CIF ARA European prices touched their highest point in seven months this week at $87.25/mt and went up $1.50/mt in Tuesday trade, according to Platts prices.

Source: Platts