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Chinese buyers turn to 'super cheap' Colombian coal as Australian restrictions persist

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Chinese buyers turn to 'super cheap' Colombian coal as Australian restrictions persist

Sydney — Colombian thermal coal is proving attractive to Chinese buyers, who are picking up "super cheap" offers from producers and traders with around 1 million to 1.35 million mt of coal on its way to China from the South American exporter, plus additional cargoes to northeast Asian countries including South Korea, market sources said Thursday.

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June-arrival Capesize cargoes of Colombian thermal coal are trading at $65/mt CFR China on a 5,500 kcal/kg NAR basis, which is cheaper than equivalent grade Australian cargoes priced at $68/mt, sources said.

One Chinese trader is understood to have booked three Colombian cargoes for June arrival, adding up to nearly 500,000 mt, said sources.

"There is 1 million mt of Colombian coal on its way to China," said one market source.

A fixture was heard Thursday at $19.25/mt for a 150,000 dwt Capesize ship sailing from Puerto Bolivar in H2 April to Qingdao port in China, according to freight sources.

This indicates a netback price of $45.75/mt FOB for Colombian thermal coal shipped to China, on a 5,500 kcal/kg NAR price basis, according to S&P Global Platts calculations.

Colombian thermal coal is subject to a 6% import tax on its delivered price at Chinese ports, which equates to around $3.90/mt currently, on top of $65/mt CFR China.

Chinese thermal coal buyers have been searching for an alternative to Australian thermal coal, which has been impacted by delays in terms of customs clearance at ports in China.

One market source estimated that about 4 million mt of Australian thermal coal was waiting to enter Chinese ports in May and June.

There is a widespread expectation in the seaborne market that China is likely to lift its restrictions on Australian coal shipments at the end of May, though official sources have yet to confirm this.

--Michael Cooper, michael.cooper@spglobal.com

--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com