Asia Coal-Australia thermal coal prices drop with China demand

PERTH Thu Nov 17, 2011 3:33pm IST

PERTH Nov 17 (Reuters) - Australia's thermal coal prices fell below $114 per tonne during the past week as demand from China, the world's largest consumer of the fuel, remained weak.

Thermal coal on the global COAL Newcastle index for the week to date closed at $113.50 per tonne on Wednesday, down from $116.50 per tonne a week earlier, with a bid for January delivery at $113.50 per tonne.

Australian thermal coal shipments from Newcastle port fell just over 3 percent in the week ended Nov. 14 to 2.53 million tonnes, down from 2.61 million tonnes the previous week.

"The Chinese just really have shut the door... some power plants are even selling back into the market," one market source said.

China's domestic coal prices were nearly flat at 852 yuan ($134) per tonne during the last week, according to the weekly Bohai-Rim Bay thermal coal price index published Wednesday.

Rising domestic prices in China often spur import buying, but even with prices falling in the rest of the Pacific region, China's utilities are so well-stocked they have shown little interest.

Traders likely bought too much coal for the fourth quarter of the year, resulting in huge queues at Chinese ports, the market source said.

Most of the southern power plants still have more than two-weeks worth of supplies, while those in the north, which tend to run short, still have about a week's worth of inventory.

One large buyer said offers for January cargoes have started to come in, but the generally weak sentiment kept buyers from committing.

China's lunar new year holiday is due to start in late January, so players are reluctant to stock up too much ahead of the week-long break, particularly without a clear sense of where the market is heading.

Demand from other large Asian buyers was also thin, but Korea Western Power Co Ltd (WP) purchased 4.45 million tonnes of Australian steaming coal via spot and term tenders.

Japanese buyers were seen as being well supplied with plenty of supply from long-term contracts.

South Korea's imports of coal in October slipped 6 percent to 8.43 million tonnes from a year earlier and Japanese utilities used 4.04 million tonnes of thermal coal in October, down from 4.08 tonnes a year ago.

The globalCOAL price index for Australia has fallen from nearly $130 per tonne in March as demand from Australia's biggest buyer, Japan, has waned and a slowdown in China's buying has dampened the coal market regionally.

But prices are still higher than a year ago when they were below $100 per tonne. ($1 = 6.346 Chinese Yuan) (Additional reporting by Fayen Wong in Shanghai, editing by Miral Fahmy)

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