Australian thermal coal prices rose to levels last seen in early November last year on the back of regional disruptions and a persistent Covid-19 surge in the country's key-producing region, which is curtailing manpower and restricting output.
Australian high-ash NAR 5,500 kcal/kg and high-calorific value (CV) NAR 6,000 kcal/kg markets were assessed at $127.52/t and $218.83/t fob Newcastle, up by $16.76/t and $26.23/t against the previous week respectively.
Tighter supplies in Australia laid the foundation for the price rally with an Indonesian export ban since 31 December acting as a trigger by squeezing regional availability of seaborne material. There are signs that the Indonesian January export ban is gradually being eased with some export vessels receiving permits to resume sailing, market participants said. But the relatively slow pace of releasing the vessels, combined with prospects of significant reduced Indonesian exports even if the ban is lifted because of stricter enforcement of the domestic market obligation policy, drove some Asian consumers to plan forward positions around Australian material.
Several Australian producers told Argus that they are struggling to offer cargoes loading in the prompter months ahead as they grapple with labour shortages and a La Nina wet summer in the key-producing Hunter valley. Tighter supplies in South Africa because of persistent rail issues left some international buyers little choice but to significantly raise price ideas for scarce Australian material. The significant distance from competing sources such as South Africa and Colombia was another factor that pushed some non-Chinese Asian consumers to consider Australian cargoes to resolve prompt needs.
A few February-loading cargoes of Australian high-CV NAR 6,000 kcal/kg were sold to southeast Asian buyers at prices higher than $250/t fob Newcastle but these could not be included in the Argus index because of specification issues.
February-loading Capesize cargoes of NAR 5,500 kcal/kg were bid at around $120-122/t fob Newcastle this week against offers that were at least $140/t. Some Australian producers told Argus that they were not interested in entertaining any bids below $140/t for this coal given the difficulties in operating under the disruptive Covid-19 outbreak. Some export vessels that arrived in Australia's key export Newcastle port in December are still waiting for coal to load, underscoring the severity of Australian supply tightness.
NAR 5,500 kcal/kg delivered prices to south China rose by a relatively modest $4.35/t from the previous week to $124.85/t. The Indonesian supply shock has not affected China's market to the same extent as other destinations that do not have any significant domestic sources to cushion the impact. The increase in price ideas for China's domestic material this week was partly driven by a surge in pre-holiday restocking because of a directive by the central government for north China utilities to hold sufficient inventories for the Beijing Winter Olympics next month. This absorbed domestic material in north China, leaving some south China coastal utilities turning to far east Russian seaborne cargoes to fill any gaps given the informal ban on Australian coal since 2020. A February-loading 40,000t of Russian NAR 5,500 kcal/kg was bid at $90/t against an offer at $125/t for delivery to south China.
South Korea
Prices of Australian NAR 5,800 kcal/kg coal with a minimum CV of NAR 5,700 kcal/kg, which is sold mostly to South Korea extended last week's gains in tandem with the Australian rally.
The NAR 5,800 kcal/kg rose by $22.75/t from the previous week to $177.48/t fob Newcastle, which equates to $186.05/t on a NAR 6,080 kcal/kg basis.
The rally came despite a relative lack of enquiries by South Korean utilities for Australian material this week. The price gains were underpinned by supply tightness in Australia that is increasing the costs of washing high-ash material into NAR 5,800 kcal/kg product.
A major South Korean state-owned utility told Argus that it is considering US or Russian coal to plug the supply gaps it is facing as a result of uncertain Indonesian policies. This is because certain grades of coal from the two origins contain lower ash and sulphur content, which is needed to blend with Australian product to reduce such elements.
