[miningmx.com] — BIG coal buyers across Asia scrambled to find replacement supplies on Thursday as mines in top producer Australia faced weeks under flood water.
Thermal coal, burned in power stations and the bulk of the world market, is tight.
Utilities in Japan and South Korea, among others, have been frantic to keep their plants humming, traders said.
Some have managed to snap up South African coal destined for China.
“The number of phone calls we’ve had today even compared with yesterday, from buyers looking for replacement cargoes is unbelievable,” one Asia-based coal trader said.
Japanese utilities were the most active in the hunt on Thursday, traders said, but they were not alone.
“South Korean utilities are getting quite desperate for spot supplies because they tend to have their inventory very lean and leave very little margin for errors,” said a Singapore-based coal trader.
Of all the South Korean utilities, industry sources said Korea Midland Power Co Ltd was the most affected. Its peers were considering leasing coal to KOMIPO, as regulations prohibit utilities from reselling their fuel.
Indian traders affected by force majeure declarations on low energy content thermal coal from Queensland’s Dalrymple Bay said they were struggling to find alternative supplies from Indonesia, South Africa or Russia.
Thermal coal has been less affected by the Queensland floods than coking coal, used in making steel, which has brought a seperate set of problems for the region’s mills.
Thermal prices have rallied on worldwide disruption and have risen further on the floods.
A Russian coal export source said there had been more enquiries from buyers other than China as a result of the floods but there was minimal Russian spot coal available.
There was prompt coal available from Indonesia and from Newcastle, Australia, but at much higher prices than the cancelled Queensland cargoes, suppliers said.
CHINA HAPPY TO SELL
China re-selling coal after halting fresh buying in November was not a bearish factor for the market – the speed at which the cargoes were being snapped up was a weightier bull factor, coal suppliers to Asia said.
China is the world’s biggest thermal coal consumer, using around 3.5 million tonnes a day. It imports a tiny percentage of its needs, and only when import prices drop below domestic prices.
Trade sources said ample coal supplies in China and the recent fall in domestic thermal coal prices have created a rare arbitrage for suppliers and Chinese buyers, who have sold back some their coal to traders to sell on.
“Some of these Chinese buyers could have ended up making a loss if they took the cargo, but the flood in Australia has created a rare opportunity for them to make some money,” said one trader.
“I would have diverted if I had overseas cargoes coming in, but it’s a pity that I don’t. It would have been easy profits,” said a Guangdong-based coal trader.
According to industry sources, at least three cargoes destined for China have been diverted to other North Asian markets in recent weeks.
A group of Chinese utilities bought an estimated 1 million tonnes a month of South African coal in a multi-year term deal signed late in 2010 and some of this tonnage is predominantly, but not exclusively, the coal being diverted, market sources said.
