PERTH: Taiwan's Formosa Plastics Group is seeking to purchase two South African thermal coal cargoes for delivery in the fourth-quarter, trade sources say. Formosa, whose import orders for South African coal have already reached 1.2 million tons this year, reportedly wants to buy a cape-sized cargo in each of the final two months of 2009.

Taiwan buyers have recently turned their attention to South African coal, prices for which are about $18 lower per ton than Australian coal.

"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 ton.

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 tons, 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 ton; paying about $63-$65 a ton 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 ton.

"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.

Reuters

(HK Edition 07/28/2009 page2)