Global thermal coal prices edge up in July on patchy demand

• Seaborne thermal coal tags rise on hot weather in Asia
  
  
• China's coal buying grows, but upside remains capped
  
  

Mysteel Global: Global seaborne thermal coal prices largely crept higher in July, buoyed by weather-driven demand spikes across Asia as well as supply-side issues in certain countries. But with structural oversupply unsolved, the market's upward momentum remained fragile, Mysteel notes in a new report on this commodity.

Supply side

Indonesia, the world's largest thermal coal exporter, managed moderate price gains last month, with 3,800 kcal/kg NAR on Panamax vessels rising from $41.3/t at the beginning of the month to $43/t as of31 July, as Mysteel assessed.

The price rally was capped in the first half of the month by a rise in freight cost, with the rate for Panamax vessels from South Kalimantan to South China rising to $8.5/t. However, a late-month pullback in Panamax rates -- down to $7.3/t as of Tuesday -- helped restore buying appetite.

In Australia, congestion eased at Newcastle Port, with vessel queues significantly shortening in July. Expanded supply eased the upward price momentum, with the 5,500 kcal/kg NAR price just rising to $67/t from $66/t.1/t under Mysteel's assessment.

Amid weak Chinese appetite for 5,500 kcal/kg NAR grade, some producers opted to wash this coal into the higher calorific value (CV) category of 6,000 kcal/kg NAR to court Northeast Asian customers, particularly Japan and South Korea, where heatwave-driven power spikes bolstered procurement.

Russian material saw the sharpest gains, with 5,500 kcal/kg NAR coal on a CFR China basis gaining by $5/t throughout the month from $70/t to $75/t, as Mysteel assessed. This came as logistical hiccups in Sakhalin and prioritisation of long-term contracts drained spot availability, Mysteel concluded.

An earthquake of magnitude 8.8 in Russia's Kamchatka Peninsula on30 July triggered a tsunami, but this did not seem to affect coal supplies from Russian Far East ports, Mysteel Global learnt from several insiders focusing on Chinese imports of Russian coal.

Demand side

On the demand side, high temperatures across Japan and South Korea in early July lifted their interest in high-CV thermal coal, but their demand was capped later by heavy rains, sources reported.

In China, the domestic thermal coal market eked out a month-long price rally following a lengthy downturn in the first half of this year. This was fuelled not only by scorching heatwaves, but also by a decline in domestic supply, especially in late July when heavy rains gripped several key producing regions in North China, which led to production and logistics disruptions.

On31 July, Mysteel assessed the price of domestic 5,500 kcal/kg NAR thermal coal at RMB 653/t ($90.5/t) FOB northern transfer ports with VAT, up significantly from RMB 619/t at the beginning of July.

China's appetite for imported coal, however, remained selective in July. While state-owned utilities such as China Energy resumed mid- and low-CV purchases after these had been suspended since March, most utilities set aggressive thresholds in seaborne coal tenders to dilute the upward momentum, the report noted. This succeeded in preventing seaborne thermal coal prices from climbing significantly,

Outlook

Looking into August, Mysteel expects Chinese demand to remain elevated. China may step up coal buying both domestically and internationally as the summer heat is expected to return in the early part of this month. However, hydropower ramp-ups, high thermal coal inventories, and a resumption in domestic supply could cap further upside, the report suggests.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.