China’s thermal coal prices recently retreated from high levels, due to weakening demand around the end of winter heating season and the government’s supply guarantee campaign. Market participants expected coal prices to face downside pressure after entering late March, the traditional slack season.
However, is it certain that thermal coal prices will lose all the strengths and have no chances of rebounding.
Thermal coal stocks at northern China ports totaled 15.93 million tonnes as of March 18, still over 10 million tonnes lower than the high level of 28 million tonnes in recent two years. Coal inventory at Qinhuangdao port didn’t increase further after exceeding 5 million tonnes on February 11, lingering around 5.1 million tonnes till now.
This situation helped little to alleviate the long-standing shortage of high-CV thermal coal at the spot market, which remained as one of main factors that may trigger a rise in coal prices.
Sources also told Sxcoal that China’s major coal-dedicated Daqin railway will undergo one-month maintenance from April 8 till May 8, inevitably leading to reduced railing inflow to ports and raising difficulties to build up coal inventory.
It will be only 20 days left for stock build at northern ports if the maintenance timeline is set as above. Bur for now, it’s still difficult for traders to get rail wagons since term contract coal shipment by major miners still occupied the most capacity.
Especially at a time when railing dispatching prioritizes delivery of agricultural materials for spring ploughing, meaning that difficulty in ordering wagons for coal may not be relived in a short term.
Coal stocks at northern ports may fall again rather than climb, if traders suffer losses again as the government strictly implements previously-set price caps and daily coal shipment via Daqin railway drops below 1.1 million tonnes.
The restrained imports of seaborne thermal coal are expected to lend some support to domestic coal. Despite small fallbacks, import coal prices were still at high levels, potentially denting Chinese buyers’ appetite, particularly amid stronger demand from other countries and supply tightness.
Indonesian coal supplies could contract significantly when the country embraces the fasting month in April, turning part of Chinese buyers back to domestic coal market.
As for the demand side, coal burns at coastal utilities didn’t fall back quickly as expected. Daily coal consumption at power plants in eight coastal provinces was around 1.75 million tonnes, and coal stocks generally maintained around 28 million tonnes, enough for 16 days’ usage.
If temperature rises above 30 degrees Celsius in southern China and economic stimulus measures are rolled out by local governments, power consumption may surge quickly again.
So seeing from now, there is a fifty-fifty chance for the Chinese thermal coal market to remain resilient during the slack season.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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