SINGAPORE – Australian coal prices have risen almost 8% since the beginning of June as a drought in South Asia pushes up power demand, although the overall sentiment in the sector remains bearish due to falling imports by other major Asian buyers.
Coal prices for prompt physical delivery from its Newcastle terminal have risen 7.85% since the beginning of the month to a last settlement of $62.50/t.
That rise puts it at parity with South African cargoes for the first time since early May.
It puts both southern hemisphere prices almost $5/t above cargoes sold to Europe's ports of Amsterdam, Rotterdam or Antwerp (ARA), which also include the cost of freight, making their discount in real terms even steeper.
The higher prices in South Africa and Australia, which largely export to Asia, are a result of scorching weather linked to the El Nino pattern in South Asian countries like India, Pakistan and also Vietnam.
The El Nino phenomenon is spurring power demand and resulting in lower exports from countries like Vietnam and higher import orders from local utilities.
Commodity brokerage Marex Spectron said it was "bullish as the supply conditions remain relatively tight in the short term."
The overall outlook for the sector; however, remains one of oversupply as economies across Asia slow and most countries make efforts to increase the use of cleaner energy sources.
China's coal imports fell around 40% in the first five months of the year as the policies aimed at cutting imports of low-quality grades and increasing the use of cleaner energy bite.
In Japan, Asia's second biggest economy, official data showed on Wednesday that imports of thermal coal for power generation declined 15.3% in May to 5.98-million tonnes.
South Korea's imports of coal fell 10.5% in May from a year earlier, customs data showed this week.