Newcastle thermal coal prices are expected to remain subdued through the second half of June and into July as discounts offered for other origin coals continue to lure Asian buyers away from Australian coal, sources told S&P Global Commodity Insights June 12-15.
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Asian buyers that have stayed away from procuring Australian coal since a price spike in the wake of Russia's invasion of Ukraine are said to be continuing to purchase more coal from Russia due to the discounts offered, and from Indonesia.
Newcastle 5,500 kcal/kg NAR coal with 23% ash price was assessed at $178/mt FOB June 14, down 11% since May 31, and down sharply from almost $300/mt in H1 March.
Russian 6,000 kcal/kg NAR coal currently is indicatively priced between $180-$200/mt CFR India, according to market sources.
"[It's] an extended period when Asian buyers stayed away from Australian coal of this grade [5,500 kcal/kg NAR]. This grade is used for blending and Japan, South Korea and Taiwan are anyway not big users of this grade. India was also not buying it for blending, so it has corrected," an Indonesia-based trader said.
"Plus, Indonesian mid-CV is available, cheaper Russian material is setting the mark for coal in Asia; that is also impacting prices."
Australian coal prices had surged earlier in the year after Russia's invasion of Ukraine prompted users to replace Russian energy sources. EU nations and Japan at the time pledged to stop importing Russian coal, which increased demand for Australian coal.
As a result, the Newcastle 5,500 kcal/kg NAR price rose from $157.05/mt FOB on Feb. 23, a day before the invasion, to $297/mt on March 11, according to S&P Global data. Prices have since averaged $206.40/mt through June 14.
According to S&P Global forecast published June 3, Newcastle 5,500 kcal/kg NAR was seen averaging $189.51/mt in June and $157.96/mt in July.
Market sources said that with Asian buyers still not interested in purchasing Australia's high-ash coal, there was more downside risk to prices due to the availability of Russian coal.
Buyers in India, Thailand, Vietnam and South Korea were procuring Russian coal and these imports were expected to increase, the sources said.
"Heard a trade at $168/mt for Newcastle 5500 kcal/kg NAR for July on June 10. This is a significant decline compared to over $200/mt levels seen continuing till a few weeks ago," an India-based trader said.
"This could also be due to port congestion in Newcastle and transportation issues over the past few days."
Australia's office of the chief economist in its latest Resources and Energy Quarterly report in March said domestic thermal coal production faces challenges in 2022 with floods disrupting mines in New South Wales and Queensland due to a La Nina weather event in the first half of the year.