(The opinions expressed here are those of the author, a columnist for Reuters.)
LAUNCESTON, Australia - The prices of differing grades of seaborne thermal coal in Asia are diverging as strong demand for high-quality fuel coal by Japan and South Korea drives a rally, but lacklustre imports by China and India mean lower grades stagnate.
Japan and South Korea are the main buyers of thermal coal linked to the Newcastle Index, which assesses coal with an energy content of 6,000 kilocalories per kilogram (kcal/kg) from Australia, the world's second-largest exporter of the power station fuel.
The weekly index, as assessed by commodity price reporting agency Argus, rose to $141.59 a metric ton in the seven days to Dec. 8, its third consecutive weekly gain and an increase of 17.5% from its recent low of $120.53 on Nov. 10.
The daily assessment by globalCOAL saw the grade reach $149.36 a metric ton on Dec. 8, with the world's leading coal-trading platform reporting physical cargoes trading at a premium to the index, a sign of rising demand.
The gains for the high-grade thermal coal come amid rising imports by Japan and South Korea, as utilities appear to prefer coal to liquefied natural gas in meeting additional power demand in the northern winter.
Japan, the world's third-biggest coal buyer, is set to import 10.37 million metric tons of seaborne thermal coal in December, showed data compiled by commodity analyst Kpler.
This will be the most since March, a strong gain from November's 8.53 million and only slightly below the 11.87 million of December last year.
It is also likely that the December 2023 figure will be revised higher as more cargoes are assessed as likely to arrive before the end of the month.
Japan's imports from Australia, which will largely be higher-grade coal, are likely to reach 6.87 million metric tons in December, versus 5.5 million in November and the highest since February.
South Korea's imports of seaborne thermal coal are forecast to reach 8.59 million metric tons in December, with Kpler data showing this will be the highest since July 2021, and up 13.8% from 7.55 million in December last year.
Imports from Australia are forecast to rise to 3.04 million metric tons in December, the most since July 2022 and up from 2.19 million in November and 1.72 million in December last year.
SOFT CHINA, INDIA
In contrast to the strength in demand from Japan and South Korea, demand for seaborne thermal coal in China and India appears muted.
China, the world's biggest coal importer, is forecast to see arrivals of 24.82 million metric tons of seaborne thermal coal in December, down from 29.38 million in November, although arrivals are up from 23.91 million in December 2022.
India, the world's second-largest coal buyer, is set to import 14.54 million metric tons of seaborne thermal coal in December, down from 17.42 million in November and 18.87 million in October.
China and India favour lower-energy coal from both Indonesia, the world's largest shipper of thermal coal, and from Australia.
The price of Indonesian thermal coal with an energy content of 4,200 kcal/kg dropped to $58.40 a metric ton in the week to Dec. 8, and is now 5.3% below its recent high of $61.60 from the week to Oct. 20.
Australian coal with an energy content of 5,500 kcal/kg ended at $93.28 a metric ton in the week to Dec. 8, little changed from $93.25 the prior week, but down 11.9% from its recent high of $105.85 in the seven days to Oct. 13.
The easing prices for lower-rank thermal coal likely reflects the lower demand for the grades from major buyers China and India.
The opinions expressed here are those of the author, a columnist for Reuters.
(By Clyde Russell; Editing by Christopher Cushing)