China and Indonesia sign £1bn deal for thermal coal imports
China will buy £1 billion worth of thermal coal from Indonesia next year following the signing of a trade deal between the Indonesian Coal Mining Association (APBI) and China Coal Transportation and Distribution, according to a Reuters report.
"It is hoped that there will be an increase of coal exports to China by 200 million tonnes in the coming year," the APBI says in a statement. "The target quantity will be reviewed every year."
Indonesia, the world’s top exporter of thermal coal, has resorted to diplomatic channels to promote coal sales around Southeast Asia, particularly in Vietnam, as exports to China have slowed.
China’s imports from Indonesia, the world’s biggest shipper of thermal coal used in power plants, dropped by 24.5 percent in the first 10 months of 2020 to 86.88 million tonnes, compared to 115.03 million tonnes during the same period last year, according to data from Refinitiv.
However, according to an analysis published by Wood McKenzie, China’s thermal coal imports are forecast to increase in December this year.
According to the market analyst, seaborne thermal coal imports will grow from 9.5Mt to 20Mt in December, with the new figure much higher than 8.8Mt recorded in September this year, or the 17.7Mt average for the first nine months of the year.
In Wood McKenzie’s view, the increase will help ease domestic prices and strengthen seaborne prices. It explains that the massive increase in imports is due to a series of factors that have hindered the National Development and Reform Commission’s goal of relying more on local suppliers in order to stabilise the price for QHD5500 to below £68.18/t.
“The QHD price has stayed at above £68.18/t since late September. The market news is that the NDRC asked coal miners to increase supply at the end of September and that domestic supply increased in October to 336 Mt, compared with 331 Mt in September, or 325 Mt last October,” the analysis reads.
“But mine accidents in Shanxi, Shaanxi and Inner Mongolia have prevented output from increasing further, and the coal price has remained around £69.88/t.”
Despite the accidents, coal imports dropped to 14 Mt in September, the lowest since May 2011.
However, according to the analyst, the expected increase, which NRDC would use to balance the market, is a negative measure.
“We do not think 20 Mt of additional coal should be purchased for delivery to China in December. Firstly, it would cause both seaborne coal prices and freight to immediately spike, which is not what the Chinese government wants. Secondly, unloading imported coal in Chinese ports will not be easy any time soon as we estimate the ports are full of imported coal yet to clear.
Finally, coal generation in the coastal region is weaker this autumn than last because of strong hydrogeneration. The coal inventory is higher than last year, making it difficult for gencos to stock the imports flooding in,” it points out.
Lynas revenue jumps 21% as rare earth prices jump
Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).
NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.
The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.
“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.
“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”
Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.
It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.
Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.
Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.