By Cho Mee-young
SEOUL, May 14 - Utilities in South Korea are turning to cheaper alternatives to their main source of coal, Australia, as prices there hit an 18-month peak and have stayed high, industry sources said on Friday.
But they said efforts to switch may eventually be limited by rising freight costs from countries as distant as South Africa, Colombia and the United States.
South Korea's total coal imports could reach 100 million tonnes this year -- which would rank it as probably the world's third-largest importer -- compared with last year's 93 million tonnes, thanks to demand recovery for power and industrial use, along with economic pickup, according to industry sources and data.
Of the total, thermal coal is expected to account for more than 75 million tonnes, compared with 71 million tonnes a year ago. Coking coal imports are also expected to rise this year, as the country's No. 2 steelmaker Hyundai Steel <004020.KS> started operation of its first blast furnace. [ID:nTOE60400E]
"We also need to import more coal as we increasingly burn cheaper, low-calorie coal than high-calorie Australian coal," the utility source said, referring to Indonesian coal.
While Indonesian coal also ranges from low to high calorie, South Korean utilities prefer around 5,000 kcal/kg on a net as received basis on average due to price competitiveness, the source noted. For Australian coal, the utilities usually consume minimum 5,800 kcal/kg, NAR, the source added.
Another utility official said they were looking for Colombian and South African coal to replace Australian because they were cheaper even after including shipping costs.
But others warned that rising freight costs could eventually narrow that price advantage.
Of the total coal imports in 2009, South Korea imported 43 percent from Australia and 33 percent from Indonesia.
FREIGHTS MAY CAP DIVERSIFICATION
Korea South East Power Co Ltd earlier this month bought 460,000 tonnes of Colombian coal at $107 per tonne on average on a cost-and-freight basis for 6,080 kcal/kg, NAR, more than $5 per tonne cheaper than South African, CFR. [ID:nTOE64303A]
South African coal over the past month has been traded at a $10-$13 discount to Australian coal, data from globalCOAL showed.
South African prices stood at $89.37 per tonne FOB from Richards Bay on Friday, while prices for standard Newcastle-grade coal from Australia stood at $102.30 per tonne, the data showed.
Australia's thermal coal late last month hit an 18-month high of $108 levels. [ID:nSGE63P0U0]
But freight costs could limit more distant options.
"It is getting harder to buy Colombian coal due to rising freight," said a utility official. All asked that their names not be used because they were not authorized to speak to the media.
The Baltic Exchange's main sea freight index <.BADI>, which gauges the cost of shipping dry commodities including iron ore, cement, grain, coal and fertiliser, was quoted at 3,914 points, and its capesize index <.BACI> at 4,861, after rising on Wednesday to its highest level since Dec. 16, 2009. [ID:nLDE64C1HG]
South Korea has five state-run utilities -- Korea Western Power Co Ltd , Korea Southern Power Co Ltd , Korea East West Power Co Ltd and KOSEP -- all of which are fully owned by KEPCO <015760.KS>.
WP late on Friday is expected to award tenders to buy 720,000 tonnes of coal for shipping from late June through August, and KOSEP to award tenders to buy 540,000 tonnes for June-September. [ID:nTOE64B06X] [ID:nTOE64A06M]
Source: http://sg.news.yahoo.com/rtrs/20100514/tbs-coal-korea-b8dd11d.html
SEOUL, May 14 - Utilities in South Korea are turning to cheaper alternatives to their main source of coal, Australia, as prices there hit an 18-month peak and have stayed high, industry sources said on Friday.
But they said efforts to switch may eventually be limited by rising freight costs from countries as distant as South Africa, Colombia and the United States.
South Korea's total coal imports could reach 100 million tonnes this year -- which would rank it as probably the world's third-largest importer -- compared with last year's 93 million tonnes, thanks to demand recovery for power and industrial use, along with economic pickup, according to industry sources and data.
Of the total, thermal coal is expected to account for more than 75 million tonnes, compared with 71 million tonnes a year ago. Coking coal imports are also expected to rise this year, as the country's No. 2 steelmaker Hyundai Steel <004020.KS> started operation of its first blast furnace. [ID:nTOE60400E]
"We also need to import more coal as we increasingly burn cheaper, low-calorie coal than high-calorie Australian coal," the utility source said, referring to Indonesian coal.
While Indonesian coal also ranges from low to high calorie, South Korean utilities prefer around 5,000 kcal/kg on a net as received basis on average due to price competitiveness, the source noted. For Australian coal, the utilities usually consume minimum 5,800 kcal/kg, NAR, the source added.
Another utility official said they were looking for Colombian and South African coal to replace Australian because they were cheaper even after including shipping costs.
But others warned that rising freight costs could eventually narrow that price advantage.
Of the total coal imports in 2009, South Korea imported 43 percent from Australia and 33 percent from Indonesia.
FREIGHTS MAY CAP DIVERSIFICATION
Korea South East Power Co Ltd earlier this month bought 460,000 tonnes of Colombian coal at $107 per tonne on average on a cost-and-freight basis for 6,080 kcal/kg, NAR, more than $5 per tonne cheaper than South African, CFR. [ID:nTOE64303A]
South African coal over the past month has been traded at a $10-$13 discount to Australian coal, data from globalCOAL showed.
South African prices stood at $89.37 per tonne FOB from Richards Bay on Friday, while prices for standard Newcastle-grade coal from Australia stood at $102.30 per tonne, the data showed.
Australia's thermal coal late last month hit an 18-month high of $108 levels. [ID:nSGE63P0U0]
But freight costs could limit more distant options.
"It is getting harder to buy Colombian coal due to rising freight," said a utility official. All asked that their names not be used because they were not authorized to speak to the media.
The Baltic Exchange's main sea freight index <.BADI>, which gauges the cost of shipping dry commodities including iron ore, cement, grain, coal and fertiliser, was quoted at 3,914 points, and its capesize index <.BACI> at 4,861, after rising on Wednesday to its highest level since Dec. 16, 2009. [ID:nLDE64C1HG]
South Korea has five state-run utilities -- Korea Western Power Co Ltd , Korea Southern Power Co Ltd , Korea East West Power Co Ltd and KOSEP -- all of which are fully owned by KEPCO <015760.KS>.
WP late on Friday is expected to award tenders to buy 720,000 tonnes of coal for shipping from late June through August, and KOSEP to award tenders to buy 540,000 tonnes for June-September. [ID:nTOE64B06X] [ID:nTOE64A06M]
Source: http://sg.news.yahoo.com/rtrs/20100514/tbs-coal-korea-b8dd11d.html
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