Indian buyers of S.Africa coal wait for lower freight

LONDON, May 21 (Reuters) Indian trading companies are trying to delay the purchase of more prompt-loading South African coal cargoes until freight rates fall $2-$3 a tonne lower, they said on Monday.

Indian importers of South African coal have been trying to juggle FOB coal costs and freight rates since January, aiming for a combined cost close to $80 a tonne, often without success, they said.

''The FOB coal price may drop to $45 or go up to $55 and we can buy on the dips but our greatest worry is the freight, because nobody has predicted that accurately this year,'' one Indian trader said.

Current delivered coal costs of $85-86 a tonne CIF are uneconomic, Indian traders said, because it is impossible to sell on this coal to end-users for more than $81-$82.

''We are making a straightforward loss at present,'' a second major Indian importer said. ''We bought coal weeks ago at $52 and then had to buy freight at $34 and we cannot sell it on at $86, and others are in exactly the same position,'' he said.

''The freight must come down at least $2 and then I could buy at least another five panamaxes right away because the delivered costs would then be feasible,'' a third major Indian importer said.

Prompt-loading South African coal cargo prices have risen to around $51.00-$51.50 a tonne FOB Richards Bay from $48.50-$49.00 last week.

Spot freight from Richards Bay to India is just over $30 a tonne but has been as high as $34 during the past several days.

Indian traders have this year tended to buy spot coal cargoes when prices have dipped to attractive levels but most of them have delayed booking freight until the last minute because they had expected freight rates to fall.

''Weeks ago the Richards Bay to India handymax freight was $27 and we said this was impossible, it could not continue or go higher, but it did, and now we're having to pay freight costs that we couldn't have imagined before,'' the first trader said.

STRUGGLE TO FIND VESSELS Indian traders with obligations to lift prompt South African cargoes from Richards Bay said they are struggling to find panamax and handymax vessels at affordable rates which are available to meet their loading dates.

Buying by Indian traders has been the strongest support for South African FOB Richards Bay prices this year because demand from Europe has been minimal.

European demand is not expected to re-emerge until Q3.

FOB prices have drifted lower each time Indian buyers have backed away from the market.

Indian trading companies bought three to four million tonnes during the first four and a half months of the year, for delivery until July/August, market sources said.

One Indian trader alone is estimated to have bought over two million tonnes for first half 2007 shipment.

For 2007 as a whole, India could import as much as nine million tonnes from South Africa, up from three million last year, some market sources said, although others doubt the total imports will exceed six million tonnes.

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