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Chinese thermal coal miner signals export intent with South Korea trip

Weakness in China's domestic market and the recent devaluation of the yuan has encouraged thermal coal miners, including major producer Shenhua Group, to look for export opportunities, sources said Friday.

Two South Korea-based traders said Shenhua had dispatched a delegation to South Korea this week to meet traders and power utilities.

One of the South Korea-based traders said he had met with the delegation Thursday.

"They are very keen to come back to the export market," he said, adding Shenhua was offering 5,800 kcal/kg NAR coal with 0.3% sulfur from their Yujialiang mine located in Shendong County in China's northwestern province of Shaanxi.

The price was about $80/FOB inclusive of the export tax.

The source said there were some special users of this type of coal in South Korea but he believed Shenhua was targeting the Korean gencos.

"They have made a tour of the Korean power utilities," he added.

For Korean traders to consider Shenhua's coal though, he said they have to match the Korean gencos' buying price and the typical high cv specifications they take normally has about 1% sulfur.

On 6,080 kcal/kg NAR basis, he said Shenhua's price of $80/mt FOB works out to about $85/mt CFR South Korea basis.

"If they want to sell to South Korea, [the price would have to be] below $55/mt CFR, basis 6,080 kcal/kg NAR. It's a long way to go," he said.

Some sources in China said South Korean utilities were bidding at $54/mt FOB.

The second South Korea-based trader said Shenhua is reportedly lobbying with the Chinese government to further lower the export tax -- which is currently at 3% -- or completely exempt the company from paying the tax to allow them to be more competitive in the market.

"They want to compete with Australian coal, but Australian prices are falling," the trader said.

"If China announces an exemption from tax, the market will see it as a signal [that China] is exporting. And I believe it is highly possible that the market will come down again as soon as they announce that," the first South Korea-based trader said.

China lowered its export tax from 10% to 3% in January this year. Additionally, Shenhua Group and Datong Group reported during an industry gathering in Beijing in April their plans to raise coal exports.

According to a Shandong-based trader, Shenhua started preliminary talks to export coal to South Korean and Japanese utilities back in April.

source: http://www.platts.com