The Coal Trader

Coal News Coal Markets, Newcastle

Newcastle Coal Prices slip 2% as sanctions “panic” eases

Benchmark Pacific Basin coal prices have slipped 2% over the past week as initial “panic” around US sanctions on Russian supply eased, while the prospect of slowing demand persisted.

Broker Global Coal’s Newcastle index, a reference price for high-grade (6,000 kcal/kg) Australian coal, was assessed last at USD 132.32/t, down USD 2.73 – or 2% – on the week.

There has been a flurry this week of physical trades, via broker Global Coal, with 11 Newcastle cargoes – predominantly for April and May loading – changing hands at USD 131-136/t.

“The physical Newcastle market continues to see sustained interest in April,” the broker said in a note, adding, however, the “best” bid and offer levels on Wednesday were USD 127/t and USD 132.80/t, respectively.

Concern was easing about US sanctions imposed last month on key Russian coal exporter, Suek, which many initially feared could see global supply squeezed as Asian buyers shunned the company’s material to avoid secondary sanctions.

“As is typically the case with these sanctions, there is initial panic,” said Guillaume Perret, director of Switzerland-based consultancy Perret Associates.

“But as it settles, the market starts to adjust as it realises there are other sources of supply – there is still a surplus of coal out there,” he said.

Tepid China demand
The world’s leading consumer, China, was also unlikely to provide much near-term support for the market, Perret said.

In fact, the country was likely to reduce thermal coal imports this year by 20m tonnes to around 350m tonnes, he said, citing in part a “modest growth in domestic production”.

“There will probably be some destocking this year in China,” he added.

At the same time, while the world’s second biggest thermal coal consumer, India, was expected to raise thermal coal imports this month – from 13m tonnes in February to 16m tonnes – this was still down from a peak of 18.5m tonnes achieved in November, according to provisional DBX estimates.

This in part reflected rapid expansion of the country’s domestic mining industry, with DBX projecting coal output to reach 113m tonnes this month, up by 18m tonnes on the month.

Also, the country’s power plant stocks stood last at 47.4m tonnes, up 2.8% on the week and the highest since June 2020, data from the country’s Central Electricity Authority data showed.

Written by Laurence Walker