[miningmx.com] — Some Chinese buyers are seeking to defer the delivery of prompt thermal coal shipments by at least a month, citing high stockpiles at the country’s ports, sources from three affected trading firms said on Thursday.
As some requests to postpone shipments have come in very late, there have been a growing number of “distressed” South African and Colombian cargoes being offered in the market.
Calls by some Chinese firms to postpone shipments have grown over the past two weeks, the sources said, a development that is set to hit feeble market sentiment and potentially push Asian prices lower.
“One of our customers told us that the loading ports are congested and they cannot take any more cargo, so they have asked to push back the delivery date by a month,” said a source at a European trading firm.
“But they told us too late, so we were forced to offer the cargo in the market and had to sell it at a discount to Richard’s Bay index,” said the trader.
An Indonesian bituminous producer also said its buyer, a large Chinese trading firm, had asked to delay an August-delivery shipment.
Still, these traders were quick to note that requests to postpone shipments were only from a handful of buyers and it did not appear that these buyers were looking to renege on contracts.
To date, coal stocks in China’s key power plants average about 63 million tonnes, which is sufficient for at least 20 days of consumption.
Coal stocks in Qinhuangdao rose 13.8% from a week earlier to 7.35 million tonnes on August 6, the highest level since early April, while stocks in Guangzhou port in the southern province hovered at 2.5 million as of August 10, port data showed.
Tepid Chinese demand has been weighing on the Asian and South African coal prices over the past two months and also dented prices on the forward curves, as traders fear the slowdown in the Chinese economy would hit import appetite.
Australian thermal coal prices, a benchmark for Asia, started on a downtrend in mid-June and lost some 13% in just two months to hover at $87.29 a tonne on Thursday – the lowest since January – while South African cargoes for September delivery fell 65c from a day earlier to $87.75 a tonne.
But most industry participants believe the end of third quarter may be the turning point for the Chinese coal market, as power plants could launch another round of pre-winter storage.
“The August-September period has traditionally been the quietest period, so the market should start rebounding as soon are we come out of summer and the stockpile is drawn down,” said Amrita Sen, a coal analyst at Barclays Capital Research.
“But domestic prices still need to go higher than international prices for the imports to start flowing in strongly.”
Defaults unlikely
Reflecting the diverse nature of Chinese coal buyers, many other trading houses, as well as producers in Australia and Indonesia, said Chinese buyers have continued to accept shipments and honour the contracts, despite prices having dropped some $20 a tonne on a landed basis.
“Some of them are wanting to push back the delivery dates but we are working within the framework of a contract. I don’t believe we are going to see a trend of major defaulting of contracts,” said a second trading source.
“This clearly isn’t a country-wide issue because some of our orders are still performing. China is a huge market and you are bound to have different qualities of counterparties out there.”
An Australian producer said its Chinese customer is currently loading a thermal coal shipment that was agreed to in June at $97 a tonne free-on-board, while a senior executive from Indonesia’s Bumi Resources said its Chinese buyers have insisted on sticking to the delivery schedules.
“We have been having production issues due to the heavy rains at Kalimantan, so we have asked some of these Chinese buyers if we can re-schedule and delay their shipments. But none of them have agreed,” said the source at Bumi.
