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Asian coal rises 4% amid mixed signals from China

Benchmark Asian coal prices climbed 4% in the week through to Thursday as the world’s biggest coal consumer looked set to increase imports this year despite reports of tightening Chinese customs restrictions.

The Pacific basin’s reference price for high grade (6,000 kcal/kg) Australian coal exports to Asia last stood at USD 68.51/t, up USD 2.31 week on week.

Global Coal’s Newcastle index remains 32% below where it began 2019, though it has expanded its premium to European prices back to around USD 16/t.

Observers highlighted ongoing Chinese appetite for coal from abroad, despite a recently announced aim of limiting imports below 300m tonnes this year. This would imply an average of
12m tonnes a month for the final two months of the year – less than half recent monthly volumes.

“Q4 imports will be higher than last year despite restrictions at some ports,” said Yu Zhai, a Beijing-based coal analyst for Wood Mackenzie. Yu estimated total 2019 imports would come in at 310m tonnes this year – up 29m tonnes year on year.

“Two ports in Huangpu Customs in Guangdong province that we visited at the end of October said their regular import business remains unaffected. Similarly, Hohhot customs cleared import volumes over 10% higher than last year in the first eight months – but we have not heard of restrictions being implemented in response.”

Opportunistic buying
Opportunistic buying was likely to continue, given the wide spread between domestic Chinese coal prices and imports, said Vivek Dhar, a commodities analyst for Commonwealth Bank.

“The idea of harsh import restrictions would be an active threat to the economy,” Dhar said, pointing to already slowing industrial activity owing to the country’s trade dispute with the US.

Restrictions did not “need to be enforced to be effective” at pressuring import prices lower, he added.

Separately, a deadly mining accident disrupted domestic production in China’s Shanxi province this week. It remained to be seen whether additional safety measures would follow, said Yu.

Coal prices on China’s Zhengzhou exchange, meanwhile, slipped 1% on the week to CNY 552.60/t (USD 78.60/t).

ANZ bank noted the region faced a mild weather outlook, with Beijing, Tokyo and Seoul seeing warmer temperatures than normal in recent weeks.

Cold temperatures were currently afflicting northeastern China, Korea and Japan, though they should pass in the coming days, according to meteorologists at Maxar.

Korean coal curbs
South Korea would limit output at its coal-fired power plants this winter to 80% of capacity from December to tackle air pollution, local media reported, citing the industry ministry.

The country, Australia’s third-biggest thermal coal customer, has around 37.6 GW of installed coal-fired capacity.

Elsewhere, Indian power plant stocks continued to climb over the past week, rising 7% to 22.4m tonnes. This was enough to meet 14 days of power generation.

Newcastle coal stocks fell 520,000 tonnes over the week to 1.95m tonnes, with 10 vessels waiting to take delivery.
Source: Montel

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