Colombian thermal coal sellers may turn to Indian buyers after failed Chinese offtake

Colombian thermal coal traders are looking to offer cargoes to Indian buyers after long congestion at Chinese ports led to the cancellation of shipments from one of the sellers amid higher waiting and offloading costs, market sources said. Multiple industry sources said the seller canceled nearly seven cargoes carrying 5,500 kcal/kg NAR thermal coal from Colombia.

"Seven shipments of Colombian coal destined for China have been canceled as a result of higher freight rates, the cost of coal was around $105.50/mt on Friday [May 10], with CFR India priced around $108/mt basis 5,500 kcal/kg NAR coal, cheaper freight may see some shipments head there [to India] instead," an India-based buyer said.

Stocks at major Chinese ports, including Qinhuangdao, Jingtang and Caofeidian, were at 24.30 million mt as of May 14, up from 22.43 million mt compared with the month-ago period, a China-based trader said.

"Yes, we have been hearing the same in those lines, some cargoes are being diverted to India due to high freight," a South Africa-based trader dealing with the Indian market said. South African exports to India may come under pressure if Indian buyers were to secure cargo from the Colombian supplier, market participants said.

One of the major producers based in Colombia said they were not involved in the transaction and were "taking the rumor with care," while another major producer reached out through email by Commodity Insights refused to comment on the issue.

At a time when Indian buyers are looking to replenish their stockpiles to meet the increasing summer power demand, the buyers may use the last-minute offer from a Colombian supplier to drive a discount to procure supply, market participants said.

Indian buyers have taken advantage of Colombia's competitively priced thermal coal as the country imported 400,000 mt of material from Colombia in the first four months of 2024, compared with none in the same period of 2023, according to S&P Global Commodities at Sea data.

Platts, part of S&P Global commodity Insights, assessed FOB Colombia 6,000 kcal/kg NAR coal averaged $82.70/mt in January-April, down from $129.15/mt in the same year-ago period. Meanwhile, Platts assessed South Africa's FOB Richards Bay 5,500 kcal/kg NAR coal averaging $86.25/mt in the first four months of 2024 compared with $111.45/mt during the same period of 2023.

Platts assessed the freight rate for a Capesize ship to move 150,000 mt of coal from Puerto Bolivar, Colombia to Krishnapatnam, East coast India at $29.51/mt May 14, down $1.38/mt on the day.

Thermal coal exports to China

Colombia's thermal coal exports to China have surged in the first four months of 2024 compared with the same year-ago period. In January-April, China-based buyers imported 3.3 million mt of thermal coal from Colombia, sharply up from 400,000 mt during the same period of 2023, CAS data showed.

One shipment containing 167,500 mt of thermal coal from Colombia has arrived in China since the beginning of May, CAS data showed. The data does not reflect cargoes that are still in transit.

While the cancellation might have happened as a result of the congestion at Chinese ports, some participants suggested that recent buying and accumulation of thermal coal from Chinese buyers -- leading to an uptick in stockpiles -- could also have been a reason behind the cancellation.

"Thermal stocks of sub-bituminous were the most ample for the shoulder period. It is my understanding that between Indonesia, Mongolia, and Russia, that China had more than enough for the shoulder season. This may be the main reason for canceling the Colombian coal and not the freight market," a US-based trader dealing with the Chinese market said.

Despite China's reintroduction of import tariffs at the start of 2024, which has put pressure on suppliers from Russia, Colombia and South Africa as these countries do not share a free trade agreement with China, Colombian coal has still found preference among buyers in China due to availability of high-calorific value coal at a competitive price, market participants said.