Rain-related disruptions at Australia's Newcastle port — a major loading terminal for thermal coal in the country — and connecting rail networks have curtailed the availability of spot high-calorific value (CV) coal cargoes.
Logistical challenges at the port and coal hauling railway lines following heavy rains and flooding since late May have exacerbated uncertainty in the seaborne market, with scarce availability of prompt June-loading and July-loading cargoes.
The supply-side interruption comes at a time when demand for high-CV Australian NAR 6,000 kcal/kg coal is showing signs of picking up, although interest from China, the world's biggest coal importer, is still limited given the surplus of domestic coal. The uptick in Japanese demand and supply tightness has supported prices. Argus assessed the NAR 6,000 kcal/kg coal market at $101.80 fob Newcastle on 6 June, up by 42¢/t on the week. The assessed price has also recovered from its year-to-date low of $91.71 on 25 April. The premium of NAR 6,000 kcal/kg coal over NAR 5,500 kcal/kg is at $36.72/t fob Newcastle on 6 June, the highest since 3 January, when it was $41.07/t fob Newcastle.
Shifting trade flows
Vessel queues at Newcastle port was over 100/d on 6 June, according to market participants. Coal producers operating at Newcastle are facing delays of up to 10 days at Port Waratah Coal Services (PWCS) terminals and about 20 days at Newcastle Coal Infrastructure (NCIG) terminals.
The delays may also lead to additional demurrage costs for producers, although at least one producer announced force majeure to cover the obligations. Several Australian coal producers said they are out of spot cargoes for June-July, while offers for August are also scarce.
This comes as some Japanese buyers requested for July-loading cargoes but could not find any firm offers because of delays and a backlog of shipments at Newcastle, prompting them to enquire for cargoes in other regions such as China.
Some traders may be holding Australian high-CV coal at China's Yantai West port, according to market participants. China does not consume high-CV NAR 6,000 kcal/kg coal, which is usually procured by Japanese utilities, and these stocks are likely held by Japanese trading houses, according to market participants.
Cargoes of NAR 6,000 at this port were heard to be offered at $130-140/t cfr Japan, according to one Australian producer. But Argus could not independently verify the details of these offers. A Japanese utility likely purchased as many as two 28,000-36,000t cargoes of thermal coal from the Yantai West port in May, according to data from analytics firm Kpler. The data does not show any vessel movement from Yantai West port to Japan so far this month.
Japan's power demand has been gradually increasing as temperatures have risen after the end of spring in late May. The country's power demand averaged 86GW in the week to 8 June, increasing by 4pc from a week earlier, according to nationwide transmission system operator the Organisation for Cross-regional Co-ordination of Transmission Operators. Some Japanese utilities are also restarting coal-fired power plants after conducting seasonal maintenance during the spring season.
