Asia Coal-Australian prices inch up, China on sidelines

Fri Feb 24, 2012 5:22am EST

* Chinese buyers out of market, enquiring Apr-May delivery

* Australian prices supported by term negotiations

* Xstrata seeking $125/T from Japanese utilities for 2012

By Fayen Wong and Rebekah Kebede

SHANGHAI/PERTH, Feb 24 (Reuters) - Australia's thermal coal price benchmark fell for the fourth week to around $106 a tonne this week, as key buyers stayed away and sellers face price pressure in an oversupplied market, but annual price negotiations with Japanese buyers lent support.

Thermal coal on the globalCOAL Newcastle index for the week to date closed at $116.69 a tonne on Thursday, down from $118.07 a week earlier.

With Chinese utilities having bought enough coal for winter heating and March being a period of traditional demand lull, traders said Chinese buyers are enquiring on deliveries for April and as late as May.

"They're now looking ahead at the next buying cycle and are hoping to book some while prices are still weak," said a trader in China.

"The prompt market is pretty dead at the moment and the bids we've received so far for off-spec Aussie coal is around $103 a tonne (CFR) China."

The off-specification coal he was referring to was that with heating value of around 5,500 kcal/kg (NAR) and ash value of 20 percent.

Despite the tepid demand, traders said annual prices negotiations between Australian producers and Japanese utilities were helping to keep a floor on prices.

Xstrata Plc, the world's largest thermal coal exporter, is seeking around $125 a tonne for a term contract starting in April.

"The final price could be around $120 per tonne, but still a bit high compared to the current curve," one market source said.

Newcastle coal for delivery in the second quarter is currently hovering at around $111-$112 a tonne (FOB).

CHINA PRICES FALL FOR 14th WEEK

In China, the world's largest coal consumer, prices on the government-backed Bohai Bay Rim index fell for the 14th consecutive week by 0.26 percent to 775 yuan a tonne ($120).

However, some traders said the lower rate of decline, along with the stabilising of prices of some coal grades at key port Qinhuangdao suggested that the near 3-month slide in prices could be nearing an end.

"It will still take some time for utilities to burn down their stockpiles but domestic freight rates are beginning to tick up and that's a good sign," said a second trader in China.

Domestic freight rates from key port Qinhuangdao to Guangzhou rose to 38.40 yuan a tonne, shipping data showed.

China's January coal imports fell 8 percent from the previous month to 19.65 million tonnes in a second straight month of declines, official customs data showed on Tuesday, hit by lower domestic prices and slowing economic growth.

Excluding lignite, which the customs agency has just included in its monthly breakdown of import data, China's coal imports were at 16.4 million tonnes, down 23 percent from December's 21.4 million tonnes.