South Korean thermal coal prices fell sharply during the week as Asia-Pacific sellers continued to compete strongly for spot business in the midst of declining demand elsewhere in the region.
Argus assessed the NAR market at $55.88 / t ($58.58 / t on a NAR basis of 6.080 kcal / kg) at $4.31 / t lower per week. NAR 5,800 kcal / kg pub Newcastle market, powered by trade with South Korean buyers, dropped by $4,57 / t per week to $47,58 / t ($49,88 / t per NAR 6,080 kcal / kg).
The South Korean market has emerged as a key source of flexible spot demand as the Covid-19 pandemic continues to weigh globally on demand for gas, with some buyers turning towards fresh supply at increasingly competitive prices.
State-owned utility Korea Western Power (Kowepo) reportedly purchased shipments of NAR 5,800 kcal / kg Australian coal this week for late May loading at $51.80 / t and NAR 6,080 kcal / kg Newcastle $48 / t. The same utility also purchased Panamax of high-calorie value South African coal for delivery in June at $51.80 / t CFR South Korea according to sources, with fellow utility Korea South East Power (Koen) having also obtained South African supplies at the beginning of the week.
And further deals may be reached next week in a series of recently opened tenders (see table), including one long-term minimum NAR 5,600 kcal / kg coal supply for the Taean power plant in Kowepo.
South Korea may be able to absorb some of the increasing oversupply of spot coal in Asia-Pacific, as demand for power shows signs of recovery and less restrictions on coal-fired power plants are expected to help a moderate rise in coal burns this spring.
After dropping sharply in March and early April, South Korea's demand for power has recently recovered to the 2016-18 seasonal average, based on a seven-day moving average of national peak power demand on a regular basis (see chart), while demand is still below 2019.
Seasonal power demand usually falls until early May before rebounding as the cooling season starts, and coal vendors may hope that this will raise solid fuel consumption and offer some relief to poor supply-side fundamentals.
State-owned Kepco utilities are increasingly likely to face fewer plant restrictions in May-June this year, which may boost coal consumption in the year. About 21.5GW of Kepco's 33.7GW coal fleet was available in April, according to data from the Korean Power Exchange, up from 20.5GW last year.
Capacity for May is currently at 25GW — from 20.3GW last year — although the maintenance plan is updated on a weekly basis and further changes are probable.
Kepco utilities burned 11.7mn t in May-June last year, down from 12.8mnt in the same months in 2018 and 12.6mn t in 2017.
