After Cyclone Debbie, China replaces Australian coal with U.S. cargoes

  • Reuters
  • Commodities News
After Cyclone Debbie, China replaces Australian coal with U.S. cargoes
Credit: © Reuters.

* Debbie knocked out 11.5 mln tonnes of metallurgical coal - Noble

* Chinese steel makers scramble to replace Australian coal

* Alternative supplies mostly come from the U.S, but also Russia

* Australian disruptions to push up coal prices - ANZ

* Coking coal futures spike: http://tmsnrt.rs/2nVCEPj

By Henning Gloystein

SINGAPORE, April 4 (Reuters) - China, the world's biggest coking coal importer, is scrambling to cover Australian supply disruptions after Cyclone Debbie knocked out mines and rails by turning to an unusual source: the United States.

Debbie, which hit Australia's Queensland state last week, caused the evacuation of several mines and damaged coal trains supplying export terminals, triggering two miners - Yancoal Australia YAL.AX and QCoal - to declare force majeure on its deliveries. With other miners like BHP Billiton (LON: BLT ) BHP.AX and Glencore GLEN.L also affected by the storm's fallout, more disruptions may follow. majeure is a commercial term that means a buyer or seller cannot fulfill their obligations because of outside forces. It is typically invoked after natural disasters or accidents.

Australia, the world's biggest coking coal exporter, is China's largest suppliers. With markets there closed on Monday and Tuesday, its steel makers are clambering to find alternative supplies.

"Markets may be closed Monday and Tuesday, but there's certainly activity. The Chinese are fixing cargoes from the United States in order to replace the shortfall from Australia," one coal trader with knowledge of the matter said, speaking on the condition of anonymity as he was not cleared to talk about commercial deals.

"More will make its way from the U.S. to China very soon," he added.

It was not immediately clear which American miners were providing the supplies, but Thomson Reuters Eikon data shows that China has already imported over 500,000 tonnes of U.S. coking coal in 2017, ending a two-year stretch when no coking coal was shipped between the two countries.

China will require more coal, as the Australian outages far outstrip what is immediately available from the United States.

"The minimum impact over the coming weeks we would expect would be in the region of 14 million tonnes of coal (11.5 million metallurgical, and 2.5 million tonnes thermal)," said Rodrigo Echeverri, head of energy coal analysis at commodities trading house Noble Group NOBG.SI , adding that the current estimate was for the outages to last around five weeks.

Shipping data in Eikon shows that around 70 ships are waiting to load coal off the Queensland ports of Abbot Point, Mackay, Dalrymple Bay, and Hay Point.

The outages caused Australian coking coal futures on the Singapore Exchange SCAFc1 on Monday to spike by over 25 percent to $197 per tonne, the biggest one-day move ever.

China has recently turned to Russia for more coking coal, with imports rising to over 400,000 tonnes in February from 275,000 tonnes in December.

Mongolia and Indonesia are other potential sources of coking coal for China, three coal traders said. Anthracite coal shipments from North Korea to China, also used as coking coal, have dried up after Beijing ordered an import ban following missile tests of its isolated neighbour. traders said it was unlikely that all of China's near-term demand could be met without Queensland supplies, likely requiring inventory drawdowns, which will push up prices.

"With a significant amount of the world's premium hard coking coal now marooned onsite, prices are likely to continue to push higher," ANZ said.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ CHART-Coking coal supplies to China

http://reut.rs/2nVctbE CHART-Coking coal futures spike after cyclone Debbie

http://tmsnrt.rs/2nVCEPj Interactive Map

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