Seaborne

Column: China and India solve local coal supply, but maritime prices remain high: Russell

An excavator sifts through low-grade coal dunes near a coal mine in Pingdingshan, Henan province, China November 5, 2021. REUTERS/Aly Song

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LAUNCESTON, Australia, Dec 13 (Reuters) – China and India appear to have largely resolved their domestic coal supply problems, but their success in boosting production has yet to be fully reflected in the price of maritime supplies in Asia.

The two Asian countries are the largest producers, consumers and importers of coal in the world and their domestic dynamic tends to stimulate the maritime market for polluting fuel.

Both had struggled in recent months with insufficient domestic production, China due to government policies that idled some mines for safety reasons, while India’s coal production and transportation were affected by the pandemic. ongoing coronavirus.

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The domestic supply crisis appears to be a thing of the past in both countries, with China’s coal production of 357.09 million tonnes in October the highest in more than six years and up from 334.1 million in October. september.

The country’s state planner said on Nov. 21 that production had stabilized at around 12 million tonnes a day, outpacing consumption and driving up stocks. Read more

India has also managed to increase its coal production, with provisional government data showing November production at 67.84m tonnes, up 10.4% from 61.47m in the same month a year. earlier.

The government said power station stocks were also rising and as of November 24 they stood at nine days’ need, meaning there is no shortage of coal.

Coal stocks at power plants had fallen to three days’ requirements in October, leading to reduced power generation and power shortages. Read more

The easing of domestic shortages in China had a marked impact on prices, with futures on the Zhengzhou Commodity Exchange at 685.6 yuan ($107.63) a ton on December 10, down 63 % from the record high of 1,848 yuan reached on October 19. .

The spot price of thermal coal at the port of Qinhuangdao in northern China did not decline as much as the futures contract, ending at 1,090 yuan a ton on December 10, but is down 57 % from October’s record high of 2,545 yuan. 19.

SEABORNE PRICE DOWN, NOT OUT

The price drop in China’s domestic market has yet to be fully replicated in Asian shipping benchmarks.

The weekly thermal coal index at the Australian port of Newcastle, as assessed by commodity pricing agency Argus, was $159.24 a tonne for the seven days to December 10.

That was slightly higher than the previous week’s $158.66 a tonne, and up from the recent low of $153.10 in the week to Nov. 12.

The index fell 39.4% from its all-time high of $252.72 a tonne in the week to October 15, but at the current price it remains high by historical standards and more than the double the $75 per tonne it was at the same time last year.

Lower-grade Indonesian coal also fell from record highs, with the grade of 4,200 kilocalories per kg ending last week at $65.94 a tonne, down 53.9% from its record high of 143 $14 the week to October 15.

However, the index is 82.6% higher than it was at the same time last year. Prior to 2021, the index had never traded above $60 a tonne according to Argus data dating back to 2008 and had only briefly traded above $50 on three occasions.

While Chinese coal futures have returned to levels slightly above their long-term average, the Indonesian and Australian indices remain at elevated levels.

High shipping prices could start to affect volumes shipped, with data from commodity consultants Kpler suggesting a loss of momentum for Indonesia and Australia, the world’s two biggest coal exporters.

Indonesian exports of all grades of coal were 31.59 million tonnes in November, down from 36.76 million in October and the lowest since April, according to Kpler.

Shipments to China fell to 14.5 million tonnes in November from 19.77 million in October, while those to India were 3.55 million from 4.99 million in October.

Australia exported 28.54 million tonnes in November, down from 30.85 million in October, and the weakest month since March, Kpler data showed.

Australia exported 8.58m tonnes in November to its biggest customer Japan, up from 10.29m in October, while second-largest buyer India recorded Australian exports of 3.25m in November, compared to 7.34 million in October.

The question for the market is whether maritime coal prices in Asia reflect the momentum of rising domestic production and falling prices in China and India, as well as signs of falling export volumes. from Australia and Indonesia.

GRAPH – Australia and Indonesia Coal Exports vs Newcastle Weekly Index Price: https://tmsnrt.rs/3pORhmc

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Editing by Christian Schmollinger

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