Global Coal last assessed its Newcastle index at USD 84.71/t, down USD 2.66 on where it stood last Thursday.
The reference price for high grade (6,000 kcal/kg) Australian coal deliveries to Asia remains 16% below where it began the year and around USD 7/t shy of a two-year low struck last month.
“We had a lot of bad news this week on trade,” said Rodrigo Echeverri, head of commodities research at Noble, highlighting China’s failing trade negotiations with the US.
President Donald Trump has accused Beijing of breaking its end of a deal, escalating tensions ahead of a Friday deadline that could see the US double its tariffs on Chinese goods and China retaliate with countermeasures.
The risk of a trade war was weighing on cargoes that may have to sell into markets potentially discounting heavily in two months’ time, Echeverri said.
“The consequences could be enormous if a full-blown trade war erupts and it could hurt both sentiment and the real economy. The markets have perhaps not fully prepared for that worst scenario,” said CMC markets in a note.
In addition, a wide spread with European benchmark prices was luring Colombian and Russian exports into Asia, blunting the impact of relatively tight Australian supplies of high calorific coal.
Newcastle’s premium to the European benchmark has retreated from its highest levels in at least six years, though at around USD 25/t remains high by historical standards.
“The market is that far apart you will get cargoes draining from the Atlantic into the Pacific,” said Echeverri, pointing to empty coal vessel queues in Colombia in particular.
Newcastle coal stocks rose by 310,000 tonnes to reach 1.5m tonnes in the week through 5 May, according to port data. There were two vessels waiting to take delivery, down from four last week.
Yet recent data showed Chinese coal demand has so far proved relatively resilient – despite trade tensions and government efforts to cap imports at last year’s levels.
The world’s biggest coal consumer posted a 14% rise in coal imports in April, bringing year-to-date imports back in line with an expansion.
“Power plants likely stockpiled thermal coal ahead of seasonally stronger demand in the summer months,” said Commonwealth Bank commodities analyst Vivek Dhar.
“It is worth noting that China’s coal imports are up around 1.7% in the first four months of the year, despite reports that China is targeting flat coal import growth this year.”
China’s “surprisingly strong” commodities imports in April suggested the country’s domestic economy was responding to recent stimulus measures, according to ANZ bank.
Coal prices on China’s Zhengzhou exchange fell 2% on the week to CNY 600.60/t (USD 88.27/t).News Source: Montel