Asia Coal-Australia thermal coal demand ramps up

Fri Jan 20, 2012 3:17pm IST

* Japanese thermal coal demand seen increasing

* South Korean buyers stock up via tenders

* Market quiet due to onset of Chinese New Year holiday

PERTH, Jan 20 (Reuters) - Australia's thermal coal price benchmark was steady around $116 in quiet trading due to the onset of the Chinese New Year holiday, despite an increase in demand from Japanese buyers and a shortage of available supply from Australian producers.

Thermal coal on the globalCOAL Newcastle index for the week to date closed at $116.19 per tonne on Thursday, unchanged from a week earlier.

Although the index remained flat, bids for prompt coal prices were as much as $6 per tonne above the index with no offers, according to one market source and prices have been climbing from a low of around $110.28 in mid-December.

A March cargo traded early in the week for $115 per tonne, while an April cargo changed hands for $114.50 per tonne on Thursday.

Supplies of Australian coal out of Newcastle have tightened in recent months, in part due to wet weather late last year as well as an outage at the Orica explosives plant that supplies major thermal coal producers in New South Wales' Hunter Valley region.

Australian thermal coal shipments from Newcastle port fell more than 14 percent last week to 2.02 million tonnes and the waiting time for loading vessels increased to above 15 days.

Demand from Japan has been robust, trade sources said, picking up after months of low demand due to coal plant outages and infrastructure damage caused by the tsunami.

Japanese utilities settled their annual coal contract beginning Jan. 1 for around $115 per tonne, sources said. The January thermal coal supply contract typically represents about 10 to 15 percent of Japan's annual imports.

The 2011 benchmark annual contract starting April 1, which represents most long-term coal volumes, was settled at a record of $129.85 per tonne.

South Korean buyers have also been stocking up.

Korea Southern Power Co Ltd (KOSPO) bought a total of 250,000 tonnes of coal from Indonesia, U.S., Russia and South Africa for delivery between February and April.

Korea South East Power Co Ltd (KOSEP) bought a total of 390,000 tonnes of sub-bituminous or bituminous coal from Australia, Russia, and Indonesia for delivery between January and April via tenders.

The 2011 benchmark annual contract starting April 1, which represents most long-term coal volumes, was settled at a record of $129.85 per tonne.

In China, the world's biggest consumer and producer of coal, the domestic coal price benchmark fell to 787 yuan ($120) last week down from 792 yuan per tonne the previous week, according to the weekly Bohai-Rim Bay thermal coal price index published on Wednesday .

Prices have been dropping due to weak demand as well-stocked utilities have kept out of the market and domestic prices have dropped about $10 per tonne since the beginning of the year. ($1 = 6.3167 Chinese yuan) (Reporting by Rebekah Kebede; Editing by Richard Borsuk)

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