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Friday, October 19, 2018

Asian Coal Prices Spike Amidst Shipping Congestion

Maritime Activity Reports, Inc.

January 4, 2018

File Image (CREDIT: AdobeStock / (c) Lidian Neeleman)

File Image (CREDIT: AdobeStock / (c) Lidian Neeleman)

Over 500 ships waiting to load or unload coal; strong winter demand has driven coal, LNG and oil prices.
 
Asian benchmark thermal coal prices have pushed to their highest levels since 2016, fuelled by demand in China and loading delays in Indonesia that have ramped up shipping congestion outside major coal ports.
 
Spot cargo prices for Australian Newcastle coal have risen nearly 15 percent from lows in late November after China loosened import restrictions to help meet a winter fuel shortage.
 
"The reason behind relaxing the restrictions was to ensure coal supplies at utilities, as some coal-fired power plants in eastern regions have been operating with minimum coal inventories," said Zhang Xiaojin, coal analyst at Everbright Futures.
 
The move by the National Energy Administration also followed an ambitious gasification programme that moved too many households and factories from coal to gas for its utilities to keep up. Traders said strong orders from India have also supported prices, which hit $105.65 per tonne on Wednesday, the highest since November 2016.
 
"India is buying throughout Q1, which means the shortage is not expected to end any time soon," said a coal trader with a major trading house, who declined to be named.

HUGE CONGESTION
Bottlenecks at import terminals across China and delays at loading ports in Indonesia's Kalimantan island, one of the world's bigggest thermal coal mining regions have added to the tighter market.
 
"The trouble to load in Kalimantan is a result of huge rainfalls. This has triggered replacement orders for supplies from Newcastle (Australia), pushing up prices there," said a second coal trader, speaking on condition of anonimity as he was not allowed to comment on trading activity.
 
The congestion started in late 2017, and is getting worse.
 
Shipping data in Thomson Reuters Eikon shows around 100 large dry-bulk ships waiting to load coal off the coast of Kalimantan, Indonesia, most of them at Samarinda and Taboneo.
 
Some ships have been waiting since late October, the data shows.
 
Even more ships are waiting to unload coal in China, where between 400 and 500 large dry-bulk carriers are waiting outside Shanghai/Ningbo and in the Gulf of Zhili, serving the ports of Tianjin, Coafeidian, Qinhuangdao and Bayuquan.
 
That's up from around 300 ships waiting outside both Chinese and Australian ports to load or deliver in late 2017.
 
Analysts expect tight market conditions to last until the Chinese New Year, which starts in February.
 
"Congestion and supply-side delays have sent prices higher. We see seaborne coal price support for the winter through to the Chinese New Year, especially from China and India," said Shirley Zhang, principal analyst for Asian coal markets at energy consultancy Wood Mackenzie.
 
However, in the longer term, prices should ease as China's import curbs are potentially restored, heading to $69 a tonne by 2021 for Newcastle, Zhang said.
 
"In general, the Asian demand growth driver is shifting away from China towards India and Southeast Asia, including Vietnam," she said, where strong demand growth would require investment into coal.
 

Reporting by Henning Gloystein 

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