Singapore (Platts)--20Jul20
Reports of defaults continued to rock the thermal coal market with sources saying that some Indian buyers had refused to take delivery of three Capesize cargoes of Richards Bay material and a few Indonesian cargoes.
An India-based trader said that he had heard of a few Indonesian cargoes that were defaulted on by some Indian buyers earlier in the week, but he did not reveal further details.
Sources said they had heard of three Capesize vessels of Richards Bay 6,000 kcal/kg NAR coal that were stranded off the east coast of India after buyers refused to take delivery amid falling prices.
The India-based source said it was quite unheard of for Richards Bay material to be defaulted on unless the cargoes were part of a long-term contract, or were being delivered on a fixed-price basis.
"The buyer might have bought the cargoes when prices were hovering at $93-$94 FOB, at which time he thought this was a good price. But since then prices have plunged which might have caused him to decline the cargoes," he said.
FOB Richards Bay 6,000 kcal/kg NAR prices have slumped $18.35/mt since the start of the year, Platts data showed.
The Indian trader said several floating cargoes from both the US and Indonesia were being offered to Indian buyers at discounted prices, but he did not quantify the discounts.
"The floating cargoes are waiting in Singapore and they will either go to India or China after getting resold," he said.
INDONESIAN COAL PRODUCERS STOCK UP
Several sources said Indonesian producers were not ready to lower prices, but instead were stocking up before the Lebaran, or Ramadan, holidays next month in the hopes that prices would rise.
Sources said during the Lebaran holidays, most Indonesian mines are closed for almost two weeks and this would impact production.
An Indonesia-based trader source said coal producers were now focusing on the domestic market, where they were getting a "good deal" at index-linked prices or even higher.
"Miners are fed up of the export market and are getting sick of the way buyers are squeezing prices. There is a limit to everything but this time buyers have crossed their limits," he said.
However, sources said miners would be forced to sell coal at lower prices this month as they have to pay the mandatory one-month bonuses to their employees during Lebaran as per government norm.
A second Indonesia-based source said producers stocking up would not help as demand from China and India remained weak.
However, the first Indonesia-based trader source said that Indonesia producers would not lower prices. He said a trader was looking to buy a cargo of 3,800 kcal/kg GAR coal at $33/mt FOB for over a month now, but he has still been unable to buy it as producers refuse to lower prices.
Sources said producers were offering the same material at $34/mt, with the second Indonesian trader saying fair value for the genuine 3,800 kcal/kg material remained at $35/mt.
"A buyer can bid whatever price he wants, but miners are not really selling at those levels," the first Indonesia source said.
The second Indonesia-based source said Indonesian producers had seen prices at higher levels previously and they were reluctant to sell at lower prices.
STOCKPILES HIGH AT INDONESIAN MINES
A third Indonesia-based source, who had recently visited mines in East Kalimantan, said miners with monthly production of about 100,000-150,000 mt of coal had halved their output amid falling prices.
"I saw huge mountains of 50,000 mt to 70,000 mt of stockpiles at the mines, which have been lying unsold for the past three weeks to one month," he said.
He said a coal producer, who was selling two cargoes on gearless Panamax vessels a month to South Korea previously, is now shipping only one cargo, just enough to cover employee salaries and operating costs.
"This is a bad time to be a coal producer. Production has been cut, you have to face the weak market and on top of that pay bonuses to employees as part of Lebaran," he said.
The India-based trader source said Indonesia producers will not lower their prices unless they have severe capital constraints. Mostly new miners are trying to stock up as they wait for prices to rise, he added.
Several low CV coal producers were hit as prices were nearing production costs, sources said, adding that production costs in East Kalimantan were high.
Platts assessed the daily 90-day prices of FOB Kalimantan 5,900 kcal/kg GAR at $71.30/mt, down 20 cents on-day and down $1.10 on-week, and FOB Kalimantan 5,000 kcal/kg GAR at $55/mt, unchanged on-day and down 55 cents on-week.
Platts also assessed the price of FOB Kalimantan 4,200 kcal/kg GAR for delivery in the next 7-45 days, July 26-September 2, at $39.20/mt, down 10 cents on-day and down 30 cents on-week.
--Deepak Kannan,
--Edited by Martin O'Rourke
Reports of defaults continued to rock the thermal coal market with sources saying that some Indian buyers had refused to take delivery of three Capesize cargoes of Richards Bay material and a few Indonesian cargoes.
An India-based trader said that he had heard of a few Indonesian cargoes that were defaulted on by some Indian buyers earlier in the week, but he did not reveal further details.
Sources said they had heard of three Capesize vessels of Richards Bay 6,000 kcal/kg NAR coal that were stranded off the east coast of India after buyers refused to take delivery amid falling prices.
The India-based source said it was quite unheard of for Richards Bay material to be defaulted on unless the cargoes were part of a long-term contract, or were being delivered on a fixed-price basis.
"The buyer might have bought the cargoes when prices were hovering at $93-$94 FOB, at which time he thought this was a good price. But since then prices have plunged which might have caused him to decline the cargoes," he said.
FOB Richards Bay 6,000 kcal/kg NAR prices have slumped $18.35/mt since the start of the year, Platts data showed.
The Indian trader said several floating cargoes from both the US and Indonesia were being offered to Indian buyers at discounted prices, but he did not quantify the discounts.
"The floating cargoes are waiting in Singapore and they will either go to India or China after getting resold," he said.
INDONESIAN COAL PRODUCERS STOCK UP
Several sources said Indonesian producers were not ready to lower prices, but instead were stocking up before the Lebaran, or Ramadan, holidays next month in the hopes that prices would rise.
Sources said during the Lebaran holidays, most Indonesian mines are closed for almost two weeks and this would impact production.
An Indonesia-based trader source said coal producers were now focusing on the domestic market, where they were getting a "good deal" at index-linked prices or even higher.
"Miners are fed up of the export market and are getting sick of the way buyers are squeezing prices. There is a limit to everything but this time buyers have crossed their limits," he said.
However, sources said miners would be forced to sell coal at lower prices this month as they have to pay the mandatory one-month bonuses to their employees during Lebaran as per government norm.
A second Indonesia-based source said producers stocking up would not help as demand from China and India remained weak.
However, the first Indonesia-based trader source said that Indonesia producers would not lower prices. He said a trader was looking to buy a cargo of 3,800 kcal/kg GAR coal at $33/mt FOB for over a month now, but he has still been unable to buy it as producers refuse to lower prices.
Sources said producers were offering the same material at $34/mt, with the second Indonesian trader saying fair value for the genuine 3,800 kcal/kg material remained at $35/mt.
"A buyer can bid whatever price he wants, but miners are not really selling at those levels," the first Indonesia source said.
The second Indonesia-based source said Indonesian producers had seen prices at higher levels previously and they were reluctant to sell at lower prices.
STOCKPILES HIGH AT INDONESIAN MINES
A third Indonesia-based source, who had recently visited mines in East Kalimantan, said miners with monthly production of about 100,000-150,000 mt of coal had halved their output amid falling prices.
"I saw huge mountains of 50,000 mt to 70,000 mt of stockpiles at the mines, which have been lying unsold for the past three weeks to one month," he said.
He said a coal producer, who was selling two cargoes on gearless Panamax vessels a month to South Korea previously, is now shipping only one cargo, just enough to cover employee salaries and operating costs.
"This is a bad time to be a coal producer. Production has been cut, you have to face the weak market and on top of that pay bonuses to employees as part of Lebaran," he said.
The India-based trader source said Indonesia producers will not lower their prices unless they have severe capital constraints. Mostly new miners are trying to stock up as they wait for prices to rise, he added.
Several low CV coal producers were hit as prices were nearing production costs, sources said, adding that production costs in East Kalimantan were high.
Platts assessed the daily 90-day prices of FOB Kalimantan 5,900 kcal/kg GAR at $71.30/mt, down 20 cents on-day and down $1.10 on-week, and FOB Kalimantan 5,000 kcal/kg GAR at $55/mt, unchanged on-day and down 55 cents on-week.
Platts also assessed the price of FOB Kalimantan 4,200 kcal/kg GAR for delivery in the next 7-45 days, July 26-September 2, at $39.20/mt, down 10 cents on-day and down 30 cents on-week.
--Deepak Kannan,
--Edited by Martin O'Rourke
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