COLUMN-Coal’s pain from yuan devaluation may be less than feared – by Clyde Russell (Reuters U.S. – August 18, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Aug 19 (Reuters) – In theory the devaluation of the Chinese yuan should be negative for the country’s coal imports and Asian prices, but so far it’s not quite panning out that way.

There’s nothing wrong with the logic behind the view that purchases of foreign coal by the world’s largest importer may decline, given the relative advantage domestic coal has just received from the weakening of the yuan.

The Chinese currency fell about 3 percent in domestic trade last week after it was pushed lower by the People’s Bank of China, a move widely interpreted as aiming to boost the competitiveness of the struggling export sector.

It wouldn’t have been a surprise if the price of the international coal that heads to China declined in dollar terms, or that the price of domestic coal rose in yuan to reflect the new currency rates.

But Chinese domestic prices remained largely steady, with no change in the benchmark price of thermal coal at Qinhuangdao SH-QHA-TRMCOAL, which held at 410 yuan ($64) a tonne last week.

The domestic price has fallen 22 percent so far in 2015, a drop that has led to more than 70 percent of Chinese coal firms suffering losses in the first half of 2015.

If the yuan depreciation didn’t boost domestic coal prices, it didn’t do too much to the benchmarks most often used to price imports by China.

The weekly index of thermal coal at Australia’s Newcastle port rose 0.8 percent last week to end at $60 a tonne, which is only slightly below the $61.94 it was in the first week of this year.

In Australian dollar terms, the index gained 6.3 percent from the first week in January to the week to Aug. 14.

For the rest of this column, click here: http://www.reuters.com/article/2015/08/19/column-russell-coal-china-idUSL3N10U1HU20150819

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