S&P Platts, January 28, 2021
Asia’s metallurgical coal market saw a strong start to the year as the benchmark Premium Low Vol FOB Australia surged 56.5% from Jan. 4 till date, highest level since March 2020, according to S&P Global Platts data.
The surge in prices was driven by restocking demand and positions taken in the spot market at a time when Australian supply came under pressure due to the wet season there, market participants said.
In mid-January, a Category Two Tropical Cyclone Kimi emerged near Queensland, Australia. The cyclone was downgraded shortly but brought about heavy rainfalls which have kept buyers on tenterhooks, with suppliers holding back on offers as they monitor the situation.
At the same time, market sources said that soaring Atlantic prices have become less palatable which in turn saw buyers from Europe, South America and India seeking for competitively-priced Australian materials. The surge in Atlantic prices, particularly for high grade coals with high coke strength after reaction and low ash, was due to the Chinese buyers’ demand for non-Australian materials.
China contemplates resale cargoes as FOB Australia prices recover
The recovery of Australian prices has resulted in reselling interest from Chinese end-users, market sources said, including coals of various grades from premium to weaker grades of coals.
However, these cargoes may have been left on the vessels for a period of time and buyers were concerned about the quality deterioration of the coals.
“More Chinese traders and end-users have approached us for reselling inquiries following the surge in [Australian] prices, but the quality of the coal is a top concern among other factors,” a North Asia trader said.
For Chinese steelmakers, they were not overly concerned if they could resell, and would only do so if the prices are favorable. A major steelmaker in North China estimates premium hard coking coal prices to hover around $170/mt FOB Australia for him to consider reselling his premium low vol cargoes.
Platts assessed Premium Low Vol FOB Australia at $160.50/mt Jan. 28, up $3/mt from Jan. 27.
Authors: Yi-Le Weng, Jessie Li