South Korean utilities procure additional summer coal
South Korean utilities secured additional summer coal supply through a series of tenders this week, as delivered prices rose.
State-owned Korea Midland Power awarded a Capesize cargo of Australian coal to trading firm Vitol at $47.50/t fob Newcastle on a NAR 6,080 kcal/kg basis. The heat content of the coal is understood to be around NAR 5,800 kcal/kg.
And Korea East West Power awarded six Capesize cargoes for loading in August-September — three to a Russian producer at around $55/t and three to trading company Glencore for Australian high-calorific value coal at around $51/t, all on a NAR 6,080 kcal/kg fob price basis.
Argus assessed the cfr South Korea minimum NAR 5,800 kcal/kg market at $56/t this week, equivalent to $58.70/t on a NAR 6,080 kcal/kg basis, while the NAR 5,800 kcal/kg fob Newcastle market was assessed at $45.47/t.
South Korean power demand remains much lower than normal for the time of year amid industrial disruption caused by Covid-19, although utilities' activity in the spot market may be a sign of steady seasonal demand for coal as the fuel remains competitive with gas at current prices.
Daily peak demand data suggest South Korean power generation in April-May was down by 10pc on the year, at 54GW, while the Korean power exchange this week forecast June demand down by nearly 4pc on the year, at 57.4GW.
But gas has probably been the first fuel displaced, as coal-fired plant restrictions have eased compared with 2019 and the fuel remains more cost-effective than domestically produced gas supplied by state-run Kogas. A slight drop in nuclear availability compared with actual generation last year may also have helped to lift coal burn on the year in the second quarter, despite weaker overall power demand.
Second-quarter coal burn could rise by 1.73GW on the year, if available capacity is dispatched at the same load as last year, which would be the equivalent of an additional 1.4mn t of NAR 5,800 kcal/kg coal burn in 40pc-efficient plants. This is based on scheduled Kepco coal-fired plant availability of around 28.7GW next month, although outages are revised weekly and could increase.
source: Argus Media
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