At least four capesize cargoes of South African coal have been sold back to the original sellers by Chinese buyers during the past month and all are coming to Europe, said sources familiar with the deals.
The South African coal is being stockpiled in Amsterdam-Rotterdam-Antwerp and at power plants either for sale into Europe or to be burned at the main buyer’s own power plants.
This comes at a time when Australian coal is for the first time in years being offered into the European market and will increase the downward pressure on DES ARA prices, which have been resilient at $125 to $130 a ton this year, traders and utilities said.
“We’ve been buying South African coal at prices equivalent to flat to the API2 index,” said one source who has bought back South African cargoes intended for China.
“We haven’t bought back any South African [coal] from China ourselves because we’ve only done spot deals there but I am aware that this reselling is going on and it is coming to Europe,” another Europe-based trader active in the Asian market said.
Headed for Europe
It comes as no surprise to the coal market that China is reselling coal previously bought as term deals, but what is interesting now is that this coal is headed for Europe rather than being absorbed in Asia, the sources said.
Chinese coal prices have been below international levels for several months, making domestic coal the preferred option and prompting reselling.
China’s state planning agency earlier this month called on regions and enterprises to adopt effective measures to keep coal prices stable.
A large trading utility last year signed a multi-year deal with several Chinese utilities and buying agents to supply a mix of mostly South African and some other origins to China.
A few other traders followed suit with smaller scale term deals, and it is these term deals which are being unwound, the sources said.
“There’s more South African and who knows what else being re-sold by the Chinese on an FOB basis. We don’t know where that’s going once it’s loaded at Richards Bay if we haven’t bought it,” another utility source said. — Reuters