China coal exports sag in May, tighten Asian supply

China's coal exports slid 23 percent in May from April amid 2007 price negotiations, further tightening supply of the fuel in Asia, where buyers are struggling with shipment delays from Australia and Indonesia.

Coal exports for May stood at 3.43 million tonnes, down from 4.46 million tonnes in April and compared with 4.40 million tonnes in the same month last year, Customs data showed.

The data cut total exports for the first five months by 27.5 percent to 19.3 million tonnes over the same period last year.

The customs office has yet to release import data for May.

Traders and industry officials said the sharp drop in May exports was due in part to ongoing price negotiations between Chinese miners and top buyers, such as Japanese utilities.

Some miners have reduced shipments to win price hikes, which would more than offset Beijing's end to tax rebates and the appreciation of the yuan, they said.

Miners in the north, such as Shenhua Group, agreed last month on 2007 prices with Japanese buyers at a record $67.90 a tonne, free-on-board, but others, including Yanzhou Coal Mining Co. Ltd. , had yet to hammer out prices.

It was the first time they could not agree on a common export price. They plan to meet next week.

"There has been no progress in talks," said a Japanese industry official. "The southern miners' initial offer for Japan was $80.5. They said they would cut volume, if the prices were lower."

They had also yet to agree on export volume, he said.

FIRM DOMESTIC PRICES, SLOW IMPORTS

With the benchmark Australian spot thermal coal prices hitting three-year-highs due to flooding near $61 a tonne, FOB, some industry officials said Japanese buyers might have to accept a higher Chinese price if they wanted to secure supplies. In China, domestic prices have also turned firm for the first time in four months ahead of the peak consuming season for conditioners.

"We expect a 'stronger for longer' case for China's thermal coal prices," said Feng Zhang, an analyst at JP Morgan.

"Once export prices are settled, Chinese exports should return to normal, and this should result in a tighter supply in the domestic market," he said in a report last week.

The analyst expected the benchmark Datong price to set new highs, rising 5 percent year-on-year in 2007.

However, the traders said Chinese imports were slowing at least for the time being, due to high international prices.

Some said China might swing back to a net exporter during the second quarter as they saw few fresh deals, although cargoes contracted early were continuing to arrive in China.

"The global market is very strong," said one trader. "Q2 imports will be much smaller than Q1."

China emerged a net importer of coal during the first four months, with imports up 50.4 percent at 19.22 million tonnes and exports dropping 28.6 percent to 15.87 million tonnes.

Source : asia.news.yahoo.com