At least 30 Panamax or Capesize vessels are floating off China's coast because traders who bought them have been unable to resell them to end-users, two industry sources said Tuesday at a conference in Indonesia.
The numbers of vessels that will run on demurrage at the expense of at least 10 Chinese coal traders who bought the cargoes from international trading companies and coal producers from the US, Colombia and Indonesia is expected to increase over the next few weeks, the sources said in interviews on the sidelines of the Coaltrans Asia conference in Bali, Indonesia.
"The situation is really very bad and is getting worse," one industry source said. A source from South Korea said he is surprised about the number of vessels that cannot discharge coal in various ports in China, saying he was previously aware that there were only 12 such vessels lying in wait.
Chinese traders who bought and already paid for the coal from the international shippers and producers are now desperately trying to re-sell the cargoes to Chinese end-users or to other north Asian coal buyers whose company does not require a tender process before it can buy coal cargoes, the industry source said.
The South Korean source said he believes at least one Korean power utility recently launched a tender to take advantage of the low prices for unsold cargoes off the Chinese coast, which will most likely be offered in Korea.
But the second industry source said Chinese end-users are still continuing to close term contract deals directly with coal producers to take advantage of falling prices. Certain Chinese end-users also are still honoring their term contracts with international coal producers, although several of them have notified their shippers to defer the shipping of the cargoes to later months as they want to buy spot cargoes as a strategy in the midst of a continuing slump in international coal prices.
Several industry sources interviewed on the Bali conference sidelines said they do not expect a thermal coal price recovery this year, with two sources suggesting that prices may recover in mid-2013. The first industry source said Chinese traders who have vessels of international coal lying in wait off China's coast bought the cargoes as they took a position several months earlier that thermal coal prices will recover by this time of year.