How soon would the Chinese return to the thermal coal market and will Indian imports continue to stay strong as in the recent months? These are two big questions everyone in the global coal market is asking.
Although currently thermal coal stocks with China look relatively high, there is no mistaking the fact that independent power producers are already drawing on their existing inventory.
At the same time, available supply is relatively static. As destocking will have to come to an end sooner rather than later, expectations have arisen that China will enter the market soon.
“A strong pick up in Chinese demand does not look too far away. In other words, one can expect increased buying activity from China in the not too distant future,” remarked an expert.
While China's January import data has come out strong, the previous two months did not witness such strength.
So, it stands to reason to assume that imports will remain strong over the next two months to make up for the shortfall, runs the argument. Timing of China's return to the seaborne thermal coal market and a likely shift in domestic market sentiment and pricing will hinge on how quickly China can destock.
As for India, imports have been strengthening in the last two months. Import figures for January have come out stronger than expected. On an annualised basis, import volume would be well in excess of 80 million tonnes.
With the rupee gaining some strength of late, the currency factor has turned somewhat favourable for imports.
Together with decent amount of pent-up demand in the system, it is expected that imports will remain robust.
After concerns were raised about Indian demand, imports have rebounded in the recent months. While still below peak levels seen in 2011, January 2012 imports are over 80 per cent year-on-year higher than 2011.
According to an expert report, as sub-bituminous prices in rupee terms have come down to levels seen in mid-2011, the cyclical risk has really fallen away. With more power units coming online, there is reason to be bullish ahead of the mid-year monsoon period given that plant stocks are low and port destocking already taken place.
So, a strong Indian demand coupled with imminent entry of China in the market is seen as a sure recipe for change of global thermal coal market sentiment, assert experts.