SHANGHAI/LONDON, Sept 20 (Reuters) - Coal prices have
steadied after sliding for months, giving relief to miners and
traders as fewer Chinese buyers try to lower agreed contract
prices, but prices may stay weak as some customers are still
hoping to defer shipments.
China is the world's top coal importer, and even tiny
percentage shifts in what it buys have amplified effects in the
global spot market.
"Price majeures" contract renegotiations and shipment
deferrals of up to 8 million tonnes of coal into China could
pinch its import appetite again in 2013.
"The biggest lesson for Chinese traders this year is not to
over-commit. After what has happened, I think many of us will be
a lot more cautious in deciding how much to buy and at what
prices," said a Shanghai-based trader who asked not to be named.
"We will also have to deal with carried over delivery
contracts and tighter credit facilities from banks. Along with a
weaker economic outlook, I think we will cut our import volumes
Shipping firms are often caught in the middle of wrangles
because buyers delaying shipment can break contracts by not
nominating vessels chartered to lift cargoes, said a shipbroker
who asked to remain anonymous because the issue is sensitive.
Widespread renegotiations of coal and iron ore contracted
prices and shipment times by Chinese trade buyers peaked in
May-June, shocking a market that had grown complacent about
never-ending Chinese spot demand supporting prices
Suppliers of Indonesian coal to China were worst-affected
because China takes more coal from Indonesia than anywhere else.
Coal contract re-negotiations are "really common when prices
are going down and stay down for a long time," said Bob
Kamandanu, chairman of the Indonesian Coal Mining Association.
China is set to import a record 210 million tonnes of coal
this year, up from 182.4 million in 2011, and to remain one of
the biggest if not the single largest importer for many years.
Despite its own vast output of over 4 billion tonnes a year,
imports especially into coastal regions far from the northern
mines will remain competitively priced against domestic coal
more often than not, suppliers said.
Spot coal prices are range-bound between $83-$90 a tonne,
driven down 20 percent since January by oversupply, and there is
scant chance of a recovery this year until global production
cuts start to bite.
IMPORTS TO STAY SLUGGISH
Chinese imported coal inventories will remain high until
prices rise because firms holding stockpiles cannot sell without
making crippling losses, and until these are digested, China's
imports are unlikely to recover to first-half levels.
Through this year the same firms seeking price adjustments
and delays have continued to buy fresh cargoes at spot prices
because they could sell these to end-users - baffled some
players trying to understand China's slowdown in power demand
growth, renegotiations and new buying.
Combined coal stocks at six big power generators in eastern
and southern China fell 1.6 percent on the week to an average
12.9 million tonnes per day, with enough inventories for 22.4
days of consumption, Qinhuangdao Port data showed on Thursday.
The 20 percent slump in coal prices in the second quarter
from around $120/T in January to two-year lows of $81.50 for FOB
Newcastle Australian cargoes in July was largely driven by
record U.S. thermal coal exports.
DEFAULT OR "PRICE MAJEURE"?
Indonesian miners have said the need to average out prices
of cargoes shipped at higher prices and those yet to be shipped
at spot levels, and to delay shipments as a serious nuisance but
not a disaster, and common when markets tumble.
These adjustments are mostly "price majeures" situations
where either party, but usually the buyer, seeks a price
adjustment to reflect a significant move in spot levels.
Reports in June of widespread defaults that turned out to be
mostly price majeures accelerated the price slide on sentiment
rather than hard facts or abundant distressed cargoes.
Major Indonesian miners including Thailand's Banpu PCL
, Bayan Resources and PT Bumi Resources
, had Chinese counterparties unable to take delivery of
June/July cargoes bought at prices $20 a tonne above spot.
"The mentality is that they can't afford to take account of
price movements, so if the price moves down they want to
renegotiate the contract," said Bayan's Alastair McLeod.
"Some rescheduling has happened but not so serious," said
Sean Pellow at miner PT Indo Tambangraya Mega.
Bumi, one of Indonesia's top three exporters, averaged out
the prices on a string of over 10 panamax cargoes of low-grade
coal sold to a Chinese trading firm for 2012 shipment but
avoided a default, sources with knowledge of the situation said.
Bumi declined to comment.
The problem centres on contracts between international
traders selling to private Chinese traders. Producers generally
and larger traders selling to state-owned buyers have had far
fewer problems, partly because buyers want to keep good
relationships and secure supply from these sources.
But the number of straight defaults, when a buyer rejects a
commitment, have been far fewer than indicated by press reports.
"It wouldn't make sense for Bumi -- or any other suppliers
for that matter -- to play hardball and insist on the previously
agreed prices because there were plenty of defaults and other
sellers were offering steep discounts," a Singapore trader said.