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Monday, 27 July 09
TAIWAN'S FORMOSA EYES S.AFRICAN COAL FOR Q4: TRADE


Reuters reported that, Taiwan's Formosa Plastics Group is looking to buy two South African thermal coal cargoes for delivery in the fourth-quarter, having already imported 1.2 million tonnes from the country this year.

Trade sources said on Monday that Formosa was seeking a cape-sized cargo each for delivery in the months of November and December, as South African coal prices are now cheaper than Australian supplies by about $18 a tonne.

"They have their own vessels so buying spot cargoes from South Africa is the cheapest option on a landed basis," said an industry source with knowledge of the deals.

The source added that a trading firm has offered November and December cargoes to Formosa at around $66 a tonne.

Formosa has been buying one cape-sized South African coal cargo on a spot basis every month since March and has so far booked shipments until October, bringing total purchases so far this year to 1.2 million tonnes, or eight cape-sized shipments, said two trade sources.

On a landed basis, the conglomerate has been able to secure South African supplies at about $80 a tonne; paying about $63-$65 a tonne on a free-on-board (FOB) basis from South Africa's Richards Bay coal port, while freight rates for the route are at around $16 a tonne.

"That's a huge discount compared to bringing in Australian coal," said a trader.

Thermal coal prices in South Africa have been trading at a discount to Australian material most of this year as demand from Europe -- the country's major market -- shrank amid falling industrial power consumption.

South African coal prices stood at $60.67 a tonne on globalCOAL's RB index on Friday, while Australian coal prices were at $78.04. The indices are based on coal with similar qualities.

South African coal exports to Asia excluding India and Pakistan in January to June were around 1.4 million tonnes, a slight rise from 2008 levels, with China having bought about 150,000 tonnes during this period.

Source: Reuters



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