June 30, 2020 / 6:30 AM / 4 days ago

Column: Coal prices slammed on slumping India imports, China fears - Russell

LAUNCESTON, Australia (Reuters) - Seaborne coal prices in Asia have plunged to the lowest in more than a decade as shipments to the region’s top importers, especially India, have come under pressure in the midst of the coronavirus-led economic slowdown.

FILE PHOTO: A worker shovels coal in a supply truck at a yard on the outskirts of Ahmedabad, India, October 25, 2018. REUTERS/Amit Dave/File photo

The benchmark Australian thermal coal price, the weekly Newcastle Index, as assessed by commodity price reporting agency Argus, slumped to $48.14 a tonne in the week to June 26, the lowest since November 2006 and down 31% from the peak so far this year of $69.59 in mid-January.

The price of lower quality Indonesian coal with an energy content of 4,200 kilocalories per kilogram, ended last week at $23.89 a tonne, the lowest since Argus started assessments in August 2008.

In some ways it’s not surprising that Indonesian coal has been hard hit, given its main market is India, where imports have been collapsing.

India’s imports of both coking and thermal coal in June are on track to be the lowest since Refinitiv started assessing vessel-tracking and port data in January 2015.

Just 8.08 million tonnes of coal had been discharged, or was in the process of discharging by June 29, Refinitiv data shows.

While this may still rise when cargoes from the last day of the month are included, it’s likely the total will be well below May’s 10.3 million tonnes, which was sharply lower than the 17.05 million tonnes average of the first four months of 2020.

India has imposed a series of lockdowns to combat the spread of the novel coronavirus, which have cut electricity demand, with coal-fired generation taking the brunt of the hit as it struggles to compete with cheaper renewable energy supplies.

While India’s economy is expected to start recovering in coming months, it may take some time for coal imports to rebound, especially given the government’s ongoing policy to eliminate the bulk of imports in favour of domestic supplies.

India’s imports of Indonesian coal were 3.1 million tonnes in the first 29 days of June, according to Refinitiv, lowest since records start in 2015 and less than half the 8 million reported in February, which was the strongest month this year.

Australia, which almost exclusively supplies coking coal to India, also saw its numbers drop, with India importing 1.56 million tonnes up to June 29, down from the peak this year of 3.7 million in January.

Coking coal prices have also been suffering, with Singapore Exchange contracts ending at $111.43 a tonne on Monday, up slightly from the recent low of $106 on June 1, which was the weakest since August 2016.

CHINA, JAPAN, SOUTH KOREA

If India is a depressing area for the region’s coal exporters, they are unlikely to be cheered by developments in most of the other major markets.

China, the world’s biggest producer, consumer and importer or coal, is likely to see declining imports in coming months as the authorities are believed to be pressuring traders and end-users to restrict buying of overseas cargoes in order to ensure domestic prices are high enough for the mines to be profitable.

Already there is some sign of slowing imports, with Refinitiv data showing 22.65 million tonnes were offloaded from ships in the first 29 days of June, putting full-month seaborne imports on track to be similar to May’s 23.28 million.

However, June’s total is likely to be well below China’s seaborne imports of 26.06 million tonnes in June 2019.

Japan, Asia’s third-largest coal importer, has seen imports hold steady in the first five months of the year, with official data showing total imports of 75.27 million tonnes.

(GRAPHIC - India's coal imports vs. Indonesia price: here)

However, Refinitiv data shows that Japan’s imports for the current month so far were at 11.5 million tonnes, down from May’s 12.6 million, and also on track to be the lowest monthly total since Refinitiv data started in January 2015.

South Korea, the fourth-largest importer, offloaded 7.3 million tonnes with one day left in June, down from May’s 8.83 million and well below the 9.08 million from June last year.

Overall, both thermal and coking coal is being slammed in Asia currently from the combination of protective policies in China and India, weaker demand because of the coronavirus pandemic and an element of seasonal weakness in the shoulder season between winter and summer peaks.

While the region’s economies should gradually pick up, the chances are there is an element of structural change in China and India that is bearish for seaborne markets.

(The opinions expressed here are those of the author, a columnist for Reuters)

Editing by Himani Sarkar

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