Recent depreciation of Chinese yuan against U.S. dollar discouraged Chinese appetite for Indonesian thermal coal, especially at a time when the ongoing COVID-19 lockdowns are weighing on power demand.
An early April-loading Supramax cargo of 3,800 Kcal/kg NAR coal arrived in South China on April 25, with the CFR price exceeding $120/t, which nets back to nearly 900 yuan/t with VAT. This has far surpassed utilities' recent awarded prices for this grade.
A state-owned utility purchased two cargoes of 3,800 Kcal/kg NAR thermal coal for May loading via a tender issued on April 19, at separately 728 yuan/t and 758 yuan/t CFR with VAT. The utility on April 22 issued another tender, to which bidding prices for 3,800 Kcal/kg NAR coal were seen at 749-799 yuan/t.
A Chinese trader calculated the preliminary cost for early May-loading cargo of this grade nears $110/t CFR, or above 800 yuan/t CFR with VAT, suggesting Chinese traders will loss 50-70 yuan/t if they choose to fulfill the tender.
Indonesian miners upheld their offers at $94-95/t FOB for Panamax 3,800 Kcal/kg NAR coal, against some buying interest of $90/t, said a Beijing-based trader. Supramax cargoes were mainly offered between $86-89/t FOB.
If the trade is done at $90/t FOB, Chinese traders would cost $2-3/t more (compared to the previous week) because of the yuan's weakness, the trader added.
Chinese yuan, also known as RMB, fell to a one-year low against the dollar on April 25, extending losses from last week as strict pandemic control weakens economic growth outlook.
On April 25, one U.S. dollar equals 6.5 yuan while it was just 6.37 yuan a week ago.
Lockdowns are still in place in more than a dozen cities across the county, including the financial hub of Shanghai. Beijing also reported new infections recently, sparking worries of strict lockdown measures in the capital city.
The lockdown measures kept weighing on power consumption, and thereby coal demand from utilities. In Shanghai, while some businesses such as chip, biopharma, auto and equipment manufacturing are proposed to restore production, new cases that have been around more than 10,000 each day indicate the government may not ease the measures in the near term.
India has a potential to strengthen coal imports to meet growing electricity demand, although trades were scarcely heard from traders. Currently, India's coal stocks are only enough for less than 10 days of use, prompting officials to call for more imports to blend with domestic coal.
(Writing by Alex Guo Editing by Tammy Yang)
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