(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, Nov 21 (Spot coal prices in
Asia have rallied 10.3 percent since the year-low in September,
but producers' hopes for an even bigger boost from winter buying
may be in vain.
The spot price of coal at Australia's Newcastle port
, a regional benchmark, reached $84.63 a tonne in
the week to Nov. 15, having bottomed at $76.70 in the week to
In the past two northern winters, the price has peaked in
late January to early February before falling back as the cold
Last winter prices rose 18.9 percent from the low in October
to the February peak, and the year before that they gained 10.8
This would imply there is still come scope for spot prices
to rise further in the next two months, but there are some
factors that make a strong rally unlikely.
Much will depend on Chinese imports and the level of
As China has improved its capacity to move domestic coal by
rail and ship, domestic prices have effectively been leading
seaborne prices as international producers are forced to compete
with local miners.
The domestic price has been gaining in recent weeks, with
the Bohai Bay Rim Steam Coal Index rising to 554 yuan ($90.96) a
tonne last week from 545 yuan the prior week.
However, thermal coal futures on the Zhengzhou Commodity
Exchange aren't indicating a sustained rally in prices.
The contracts were launched in September and have quickly
established themselves as a liquid and viable benchmark even
though trading is limited to domestic players and
China-registered wholly foreign-owned enterprises.
The January contract was at around 568 yuan in early trade
on Nov. 21 and the December future was at 580.4 yuan.
While these are above the latest Bohai Bay price, the
January contract is only commanding a premium of around 2.5
percent, indicating that the Chinese domestic market isn't
expecting a shortage of coal over winter.
COAL PRODUCTION STEADY
China's coal output rose 1.6 percent to 320 million tonnes
in October from the same month last year, according to data on
Nov. 19 from the China Coal Transport and Distribution
This brought production for the first 10 months to 3.096
billion tonnes, down 0.3 percent from the same period in 2012.
While domestic output has been largely steady, imports have
grown strongly, with official customs figures showing China
bought 196.65 million tonnes in the first nine months of the
year, a gain of 18.6 percent.
Figures from the CCTD, which include imports of low-value
lignite, suggest bigger volumes but similar percentage gains.
Imports totalled 260 million tonnes in the 10 months to
October, a gain of 17.3 percent, the association said.
However, the recent gains in Newcastle prices have
outweighed those for domestic coal, suggesting that the price
advantage imported coal has enjoyed in recent months may be
Still, there are some bullish short-term factors, with
inventories at China's Qinhuangdao port, a major shipment point,
down to the lowest level since May.
Rising prices in Europe on the back of possible supply
disruptions in Colombia and South Africa will also spill over
into Asia, especially since South Africa acts as a swing
supplier between Europe and Asia.
But these are short-term factors that may not boost prices
on a sustained basis over winter.
For that to happen, Asia's major buyers will have to demand
more coal, but, with the exception of India, it appears they may
have adequate stocks available.
China's overall inventories are around 300 million tonnes,
near record high levels, and stocks at major power plants are
believed to be around 21 days consumption, a comfortable level.
While there is buying interest from China, traders report
that most of this has been for low-rank Indonesian coal.
Unless the winter is colder than forecast, it seems unlikely
that there will be rush for coal supplies, meaning that the
Newcastle price may struggle to rally to levels above $90 a
(Editing by Richard Pullin)