Coal prices slip as China, India buy less

● The thermal grade of coal is most commonly bought by Indian utilities, and was the preferred Australian grade among Chinese buyers prior to Beijing’s unofficial ban on Australian cargoes, imposed amid a diplomatic dispute in mid-2020.

Launceston, Australia, Jan. 30: Asia’s seaborne thermal coal markets are losing heat, with both prices and volumes declining as winter demand passes and Europe’s energy crisis eases.

Prices of the main traded grades for coal used in power plants dropped to their lowest in months last week, and to the weakest in a year in the case of one of the major Australian varieties.

Australian coal at Newcastle Port with an energy value of 5,500 kilocalories per kg (kcal/kg) , as assessed by commodity price reporting agency Argus, slipped to $129.87 a tonne in the week to January 27, the lowest since the week to January 21, 2022.

This grade of coal is most commonly bought by Indian utilities, and was the preferred Australian thermal grade among Chinese buyers prior to Beijing’s unofficial ban on Australian cargoes, imposed amid a diplomatic dispute in mid-2020.

While the Chinese ban has been lifted, it’s unlikely that buyers will flock back to Australian thermal coal, given the availability of cheaper, and similar quality, coal from Russia.

The higher quality 6,000 kcal/kg Newcastle grade also dropped last week, with the index ending at $307.47 a tonne, the lowest since April and 31 per cent below the record high of $442.89 reached in early September.

This grade is more commonly purchased by buyers in Japan and South Korea, usually on a contract basis, meaning the spot market accounts for only a small portion of overall volumes.

The weakness in prices wasn’t limited to Australian thermal coal, with Indonesian grades also dropping.

Indonesia is the world’s largest exporter of thermal coal, while Australia ranks second and Russia third. Lower quality Indonesian coal with an energy value of 4,200 kcal/kg ended last week at $80.39 a tonne, the lowest since early September.

This grade is preferred by Chinese utilities for its low sulphur and ash content, and is also sought by Indian power plants as it is cheaper than alternatives from Australia and South Africa.