FOB Richards Bay coal price moves down as traders eye China

Friday,8Jul, 2011

London (Platts) : The Richards Bay physical thermal coal selloff continued Thursday, with two late-afternoon deals going through at about $116/mt FOB.

London Commodity Brokers executed an August FOB trade at $116.25/mt for 45,000 mt, with a northwest European utility trader said to have bought from a producer.

The GFI Group also brokered a deal at $115.75/mt for 75,000 mt, with exchange of futures for physical terms. A utility trader was said to have sold to a producer.

One source said lower prices were driven by lack of demand, "pure and simple," noting that Richards Bay was "not far off pricing into Europe again."

"Some utilities need South African coal, so they will top up. Two years ago, 70% of South African coal went to Europe, and [utilities] can divert or roll other tonnages," the source said.

He added there is demand for Richards Bay, not just in ARA, but in the Mediterranean and Turkey, with South African coal likely to come into Europe "at decent levels" if the arbitrage is there.

But with freight for capesize vessels between Richards Bay and Rotterdam currently reported at $10.50/mt, the markets would still need to diverge by around $3/mt for the arb to open.

A Switzerland-based trader said Richards Bay was being discounted for willing buyers, but noted that most people were putting cargoes straight into storage. A utility source said all the South African material bought in July had been intended for Asia, but he was "not sure [Chinese] buyers really want it." A third source, however, said the producer seen buying at $115.75/mt FOB was very likely to sell directly to China with the "right freight rate."

No deals were seen in the CIF ARA market, although an August bid-offer range of $123.50-124.25/mt placed the market at marginally lower levels on-day.

The FOB Newcastle market also weakened a touch, with an August bid-offer range reported at $120.50-122/mt

Platts assessed the daily 90-day CIF ARA price at $124/mt, down $0.50/mt, FOB barge (ARA) at $126.50/mt, down $0.50/mt, FOB Richards Bay at $115.90/mt, down $0.60/mt, and FOB Newcastle at $121.25/mt, down $0.50/mt.

--Mark Selby, Platts