Australian thermal coal prices soar amid tight supply even as Indonesia eases ban

Australia's thermal coal market is expected to see rising interest in the near term even as Indonesia eases its export ban amid increasing omicron cases and persistent rains leading to supply tightness, sources said Jan. 28.

Market participants had expected Australian prices to soften after Indonesia relaxed its export ban Jan. 20, anticipating an easing of some pressure from the Australian coal in the global supply chain. However, prices have remained elevated and sources expect the trend to continue in the near term.

Wet weather conditions and omicron spread have limited production at mines, leading to berthing delays at Newcastle, sources said.

"There are supply issues in Australia such as exposure to COVID-19 at mines and heavy rains. This has also hampered the ports so there is congestion," an Indonesia-based trader said.

The trader added that Australian coal sellers negotiate long-term contracts with Japan around this time of the year and prices remain elevated due to the firm demand.

As Indonesia banned coal exports in January due to critically low domestic stock levels, demand for Australian coal grew stronger to fill the vacuum created in the buyers' market, thereby lending support to Newcastle prices. Jakarta relaxed the blanket ban mid-January onwards, Platts reported Jan. 13.

The price of Australian 5,500 kcal/kg NAR rose from $103.50/mt FOB on Dec. 31 to $140/mt FOB Jan. 27, Platts data showed.

"There has been rain which has impacted logistics, but it is also the end of the summer holiday period, so workforce staff has been on leave. I would argue there is almost no spot coal available anywhere globally at the moment. That is helping to support spot prices at higher levels," said Matthew Boyle, manager for global coal, Asia power and dry bulk freight with Platts Analytics.

Australian thermal coal exports are expected to touch 212 million mt in 2022-23, according to the quarterly review published by the Chief Economist's office. Thermal coal exports stood at 192 million mt in 2020-21. The financial year in Australia runs from July to June.

Berthing delay at Newcastle

Vessels at Newcastle port were heard experiencing berthing delays from anywhere between six to 22 days, according to shiploaders.

"There is congestion [on east coast Australia] and many cargo laycans are postponed. I just saw a Newcastle early February laycan cargo delayed till March [for loading]," a source said.

"They were pushing January-loading cargoes to February because of production problems which is unusual in Australia. They don't change laycans unnecessarily and because of the production problems, ships also have to wait," an India-based trader said.

According to the Australian Bureau of statistics, the country exported 167.4 million mt thermal coal in January-October 2021, marginally lower than 168.1 million mt in the same period in 2020.