Newcastle thermal coal prices hold up

THERMAL coal markets have declined by 1.2%, but prices in the physical Newcastle market were unchanged, despite a continuing bearish market outlook, according to the ANZ bank.

Lou Caruana

A flurry of buying activity could support a rebound in physical Newcastle prices from lows near $US75/t, it said, despite the IMF downgrading China’s growth forecast to 7.8% this year and 7.7% in 2014, down from its earlier estimates of 8.1% and 8.3% in April.

“Encouragingly, other energy consumers appear to be benefiting from lower thermal coal prices, with Japanese utility Tepco boosting its coal-fired power generation in June,” ANZ said.

“South Korean utility Korea East-West Power is also seeking 280kt thermal coal in a spot tender for delivery from August to September and 840ktpa in a four-year term tender.

“Other South Korean utilities also issued a joint tender for 700kt for delivery in September to November.”

The outlook for coking coal is not so positive, according to ANZ.

“We are still cautious on China’s steel market, with a little too much steel output produced in the first half, which means we may see weaker steel output in the second half as steel mills run down steel stocks,” it said.