SOUTH AFRICAN COAL: Three August Richards Bay FOB cargoes trade at $87/mt
London (Platts)--27Jun2012/843 am EDT/1243 GMT
Three South African thermal coal cargoes traded Wednesday morning in the space of ten minutes, all at $87/mt, as sources said the supply-demand balance for Richards Bay FOB coal is loosening.
Two 50,000 mt South African coal parcels traded through the globalCOAL screen at $87/mt, while a third 25,000 mt shipment went through the same platform slightly later in the morning.
Sources said that one of the 50,000 mt involved a northwest European utility trader buying from a Switzerland-based trader. The other two deals were said to have involved two traders each.
Market participants said the trades were between a 10 cent discount and flat to the API4 (FOB Richards Bay) index, which is down from a 25 cents discount Monday.
The trades were 20 cents below Platts' 90-day Richards Bay FOB price, 5 cents above a similar trade seen after the Platts' assessment window closed Tuesday, and the highest Richards Bay deal seen in almost six weeks.
Later in the morning, there was a 2013 trade of 25,000 mt/month of South African coal at $95/mt, also through globalCOAL. Sources said it involved a utility trader buying from a trader.
SHORTCOVERING
Traders say that after the Richards Bay market has fallen so heavily for the last month or so, the market is currently covering short positions which is driving levels back up.
Platts' data showed that Richards Bay FOB physical coal prices fell $22.40, or 21.5%, from the beginning of April to June 14, the lowest level seen in the market in more than two years.
In comparison, European CIF ARA 90-day prices fell $15.40 in the same period.
Prices in the last two weeks have recovered on a resurgence in buying interest in the paper market, which have seen Richards Bay FOB spot prices surge $5.55, or 6.8% from June 14 to Tuesday. In the same period, CIF ARA prices gained $5.
"The mood has been very negative for a very long time so perhaps participants have left themselves very short and are now running for cover," a London-based trader said.
A north European utility source said that when South African spot prices were dropping sharply, no one wanted to buy in a falling market, but now that levels were recovering, people rush in to buy and have to pay cargoes at the current prices.
"There's enough people buying it to not be a one-off anomaly. There are a few [people offering cargoes] who are very relieved that the bids are back in, so there is a lot of volume trading," the utility source said.
INDIAN INQUIRIES
Demand for South African coal is said to be coming mainly from India, after Chinese end-users -- the other major buyers of South African coal -- started defaulting and renegotiating cargoes earlier in the month.
While some sources say the monsoon season is hampering any incremental demand in India, a shortage of coal stocks at power plants are maintaining Indian buyer's inquiries.
At the same time, the London-based trader said that China "at a price is always there" so participants who have a short position in China are perhaps covering their falls now and purchasing cargoes.
"I can tell you that Richards Bay is super tight at the moment, finding a cargo to buy in July even at current high prices is almost impossible," he said.
He added that the problem is on the supply side at the moment, more than on demand, as supply is not as strong as previously thought.
The utility source said there is definitely still demand from India, while Chinese stocks are still healthy, which, for him, would give players the opportunity to sell some South African coal to people who might pay a premium for it, particularly in the Mediterranean area.
But he did not consider the market to be overly bullish at the moment, as he felt that the decline went too far and what was happening now was a clawback of some losses.
"Overall, the supply and demand picture is looser than it once was. Is it a ragingly bullish arena all of a sudden? No. Will we find a fair price in the next months? Yes, in my opinion," he said.
