Exclusive: China's First Canadian Coal Transshipment to Indonesia Exposes Met Coal Arbitrage—and a Path to Narrowing FOB-CFR Gap

Canadian cargo priced off CFR China index sold at premium to Southeast Asia—traders capitalize on dislocation

Putian Port’s first-ever coal transshipment—82,500 tons of Canadian coking coal re-exported to Indonesia—has revealed a profitable and increasingly relevant arbitrage model in the metallurgical coal trade.

The cargo was priced off the CFR China index, but ultimately sold to an Indonesian steel mill, exposing a widening gap between Chinese index levels and ex-China market valuations. Traders stepped in to bridge the two, capturing the spread by purchasing index-linked coal in China and reselling it at higher fixed prices to Southeast Asia.

This model, built around bonded warehouse re-export and fast customs clearance, is replicable for Other SEA countries, India, and even JKT, providing traders with a flexible platform to redirect cargoes based on real-time price differentials.

Key Implications:

• Arbitrage Opportunity: Traders monetize the divergence between weaker China-indexed pricing and stronger ex-China fixed offers from miners.

• Benchmark Disconnect: CFR China may no longer reflect regional fundamentals as Southeast Asian demand holds firmer.

• Scalable Trade Model: The Putian mechanism enables rapid pivoting of cargoes into alternative markets like Vietnam, India, and JKT, using China as a distribution hub.

Signs of a Broader Market Correction:

• Australian PHCC Miner's CFR Exposure and Index Pressure: A major Australian miner's spot and term cargoes into China are indexed to CFR China. As traders re-export these tons, they effectively increase supply pressure on the index, accelerating its decline and weighing on PLV FOB prices.

• PMV Sensitivity to Re-exports: Just one PMV cargo reloaded from China into India could tip the region’s delicate supply balance. This would collapse regional PMV premiums, triggering a cascading correction across the seaborne complex—including PLV.

• FOB-CFR Gap Closure: As this model scales, it will help narrow the current wide gap between FOB producer offers and CFR buyer bids, bringing pricing closer to true regional equilibrium.

  
  

As buying interest shifts beyond China while supply remains concentrated, these arbitrage-driven flows through bonded hubs like Putian could become a defining feature of the next phase in Asian met coal.