India close to resuming thermal coal buying - traders

Thursday, 27 January 2011
Indian traders and end-users are close to resuming thermal coal prompt buying after a hiatus of several months, some of India's largest traders said. Coal prices have dropped to around $115.00 a tonne FOB South Africa's Richards Bay from $130.00 in early January and this, combined with plumetting freight rates, has brought an acceptable delivered cost within sight, they said. Indian and Chinese spot buying has been a key price-affecting factor for the past few years because the growth of these markets absorbed what would have been a rising global surplus and left the market finely balanced.

The timing of any rise or fall in demand from India or China can have significant price implications in the international coal spot market."End-users in India were never going to pay $130 plus freight for South African coal but they are close to buying again and they also know they can get Indonesian coal a bit cheaper," said a source at one of India's biggest trade importers.

This spot buying dried up in November and only the severe European weather which boosted coal demand and the disastrous Australian floods pushed prices sharply higher."There was some selling but on a very small scale when prices were high and that's finished now, there are enquiries instead, especially for Indonesian coal," said an Asia-based trader supplying the Indian market.

The price correction since mid-January has not yet been sufficient to draw out Indian buying - end-users have relied on stockpiles instead of fresh imports."Coal prices need to fall another few dollars, maybe $5 would be enough if freights keep going down but consumers are now ready to buy," another major Indian coal trader said."The appetite is there, particularly among the cement companies who prefer South African coal," said an India-based trader for a European firm.

Demand for imported thermal coal in India has not changed despite the lack of recent buying and comments from the Coal Minister suggesting high prices could curb imports, traders said. India's coal deficit will deepen in the next fiscal year to 104 million tonnes, an increase of nearly 24 percent. (Source: Reuters)