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First Korea, now Japan: Colombian coal exports to Asia spread

Japan has started significant imports of faraway Colombian thermal coal, the second Asian country after South Korea, depressing Pacific prices and pressuring mining competitors in Australia and Indonesia.

Several traders said that Japanese utilities ordered around 50,000 to 100,000 tonnes of Colombian coal for delivery in the summer months, although the exact figures of the orders were not clear.

Japan last imported Colombian thermal coal in January 2014, government data shows.

"After the South Koreans made the first big orders for Colombian coal recently, other Asian utilities took note and have started to book some cargoes as well," one coal shipper said on Wednesday.

Cost efficiency gains at home as well as cheap freight rates allow Colombian miners to export profitably to Asia, a route previously unprofitable because of voyages times as long as two months.

Colombian miners are targeting Asia in a bid to find new customers as consumption in their traditional markets of Europe and North America is stalling.

The arrival of the South Americans in Asia's coal markets has helped pull down prices for prompt cargoes for loading from Australia's Newcastle terminal by about $5 since March to $50.55 per tonne currently, not far off its January record low of $48.60.

The extension of the Panama Canal, set for completion in June, will further boost Asian imports of Colombian coal, Asian utility sources said.

Japan is the second major Asian coal consumer to ramp up imports from Colombia.

Korea Midland Power (KOMIPO) has purchased 250,000 tonnes of Colombian coal for delivery between July and September on order, priced at $44 per tonne, a discount of about $6 to Australian coal cargoes for delivery during that time.

"Colombian coal has become attractive to us recently not only because the products itself are cheap but also the freight costs have been favorable," said a utility source with knowledge of the matter.

KOMIPO's order follows purchases in April by South Korea's East-West Power utility for 670,000 tonnes of coal from Colombia for delivery between June and August.

South Korea's previous monthly imports of Colombian coal typically did not exceed 3,000 tonnes.

Colombia's arrival in the Asia/Pacific region puts pressure on the region's miners, already suffering from oversupply.

Beyond its competitive price, Colombian coal also tends to be higher quality.

"Colombian coal is more a direct competitor to Australia. The Australian/Colombian coal represent far better value for money in terms of total cost of electricity generated than Indonesian coals," said Keith Whitchurch, director of SMG Consultants in Jakarta, Indonesia.

source:Reuters