Asia Coal-Australia thermal coal prices inch up, China demand up

PERTH, April 29 Fri Apr 29, 2011 7:19am IST

PERTH, April 29 (Reuters) - Australia's thermal coal prices, a benchmark for Asia, rose slightly in the week to Friday, while in China coal buying began to ramp up on power demand as summer approaches.

Australia's thermal coal prices on the globalCOAL weekly index, a benchmark for Asia, closed at $122.23 per tonne for the week to date on Thursday, up from $121.48 a week earlier.

Newcastle coal for July delivery traded at $123 per tonne for 25,000 tonnes, while the same tonnage for the fourth quarter traded at $126 and $127.25 per tonne.

"China is definitely the lead player in the market at the moment," one Singapore-based trade source said.

Chinese buyers have been buying up Indonesian coal, which is generally cheaper than Newcastle coal, since the end of March when Chinese domestic prices rose enough to make imports attractive.

Power demand from factories and increased construction activity pushed up China's thermal coal prices for the fourth straight week, with growing warnings of a summer fuel shortage boosting daily prices to a five-month high of 815 yuan ($125.160).[ID:nL3E7FQ118]

Despite the increase in coal imports, China will likely face electricity shortfalls of around 30 gigawatts this summer, a supply gap which could widen. [ID:nL3E7FS2O4]

The buying follows a long spell during which China, the world's largest consumer and producer of coal, virtually stopped imports due to higher international prices.

But Australian coal prices are still too high to attract buyers, even for "off-spec" material.

"For the Newcastle standard, the arbitrage is still closed," another Singapore-based market source said, but added that Chinese buyers could soon be interested in off-spec material with 5,500 kg/cal coal bids and offers just $2 to $3 away.

Still, Chinese demand will keep Newcastle prices supported, the Singapore-based market source said.

"Prices were bearish, but China is supporting the Indonesian market, so I don't think Newcastle prices will drop in the next couple of weeks," the source said.

WEEK AHEAD

Traders will continue to watch Chinese demand closely for hints of any widespread buying that could push up prices region-wide, especially with government officials saying that China must brace to cope with power shortfalls as the country enters the high energy-consuming summer months. [ID:nL3E7FP2VT]

ADDITIONAL REUTERS COAL COVERAGE:

RECURRING MARKET REPORTS

European physical market............

European swaps market...............

Australian spot prices..............

North America coal market...........

STOCKS AND IMPORT/EXPORT DATA

Australia Newcastle stocks..........

S. Africa's Richards Bay stocks.....

TRADES AND TENDERS Spot trades... [COAL/TRADE\]

Coal tenders...

COAL PRICES

McCloskeys weekly physical spot/freight prices...<0#MCC-CASH>

API4 coal paper prices, McCloskeys............<0#MCC-C-API4>

API2 coal paper prices, McCloskeys............<0#MCC-C-API2> ($1 = 6.512 Chinese Renminbis) (Reporting by Rebekah Kebede)

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