Mild outlook weighs on South Korean coal market

Weaker high-calorific value fob coal prices in Asia-Pacific pressured Argus' South Korean net forward values this week.

The basket of four South Korean net-forward prices for Australian, Russian and South African coal averaged $79.11/t on a NAR 5,800 kcal/kg basis, down by $2.82/t on the week.

High-calorific value Russian coal was heard to have been sold into South Korea at around $72/t cfr on a NAR 6,080 kcal/kg price basis. The deal was reportedly for NAR 6,000 kcal/kg material, although this was unconfirmed at the time of publication. Market participants saw NAR 5,800 kcal/kg coal delivered to South Korea at around $69-70/t.

A South Korean utility also purchased NAR 3,900 kcal/kg coal on a fob basis at a price equivalent to around $24/t, according to one source. The deal was probably for Indonesian coal.

The near-term outlook for high-calorific value coal demand in South Korea remains subdued because of continuing plant restrictions and mild weather.

South Korean power demand is expected to average 66.83GW in February, according to a Korean power exchange forecast today, which would be 2.2pc higher on the year, but still unseasonably low. Daily mean temperatures in Seoul were 0.8°C higher than the 10-year average in February 2019, and the meteorological administration says there is only a 20pc chance of below-average temperatures next month.

No new coal-fired plant restrictions were announced this week, but existing curtailments will continue to weigh on power-sector consumption, compared with last winter. Three units with a combined capacity of 1.5GW — Samcheonpo 5 and 6 and Boryeong 3 — will be offline for the whole of February, while the 1.02GW Samcheok Green unit will be out of action until 27 February. Dangjin 4 and 6 and Taean 5 and 6 — all 500MW units — are scheduled to return on 17-24 February.

This means operational state-owned Kepco capacity will average 29.6GW next month, out of installed capability of 33.7GW. Actual output will be lower than this because of additional partial restrictions that limit the use of operational capacity, with generation potentially dropping to 24GW, assuming an average 81pc load. Kepco coal-fired generation was 25.6GW in February 2019 and a 1.6GW year-on-year decline next month would be the equivalent of 430,000t less 5,700 kcal/kg coal burn in 39pc-efficient plants.