(Repeats to fix headline)
By Rebekah Kebede
PERTH May 17 Australia's thermal coal prices, a benchmark for Asia, dropped sharply during the last week, pressured by a lack of demand and a switch to lower-quality coal, trade sources said on Tuesday.
Thermal coal on the globalCOAL Newcastle index closed at $115.88 per tonne for the week to date on Monday, down from $121.13 a week earlier.
"In general, nobody is happy to pay the premium for the Newcastle coal -- they are actually quite happy taking the high ash stuff," one Singapore-based trade source said, referring to lower-quality coal.
Japan, the largest importer of Australian coal, whose coal-fired plants often require at least some higher-quality Newcastle coal, has seen coal purchasing decline since it was hit by a devastating tsunami in early March that shut some power plants. [ID:nL4E7GH07L]
Coal shipments from Australia's Newcastle port, which ships mostly thermal coal used in power plants, dropped 8 percent during the past week due to lower demand.
Instead, buyers have turned to "off-spec" Australian coal that falls below the Newcastle quality specifications as well as Indonesian coal to fill their needs, trade sources said.
Chinese buyers in particular have been hunting for coal supplies to import, but have preferred lower-quality Australian coal at bargain prices over the higher-price premium Newcastle coal.
Chinese coal import demand has been spurred after domestic prices in the world's largest consumer and producer of coal spiked recently.
Last week, Chinese domestic coal prices rose for the fifth straight week to over $125 a tonne, but the Chinese coal rally may be coming to an end, some market sources said, with stockpiles moving up after a two month decline.[ID:nL3E7GB25L]
But with China poised for its worst summer power crunch in years, prices and imports may stay strong given that coal accounts for more than 80 percent of its power generation. [ID:nL4E7GH1B6]
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\]
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> (Reporting by Rebekah Kebede; Editing by Ed Lane)