China’s thermal coal market mixed at major production areas

China’s thermal coal market was mixed at main mining areas on July 19, with prices weakening in Shaanxi and Inner Mongolia amid flagging demand while Shanxi still seeing firm prices.

The whole market is still dominated by the thick wait-and-see sentiment, and confidence for the typical peak season is fading along with rising uncertainties.

The root cause of the current market stalemate is supply-demand fundamentals, as authorities’ stronger moves of ensuring term contract coal supply have built up stockpiles at power utilities as well as northern ports, which dented their eagerness for spot coal replenishment and also lowered their acceptable price levels.

A special inspection team of China’s State Administration for Market Regulation was sent to Yulin, a major coal mining hub in Shaanxi, to look for any illegal behaviors for manipulating market coal prices at each mine.

This along with series of tough moves showed that the government’s resolve in guaranteeing fuel supply to stabilize economic development. A multi-year high of 15.3% in China’s raw coal production growth in June has partly showed effect of Beijing’s series of output increase move, and January-June output also amounted to 2.19 billion tonnes, showed data from the National Bureau of Statistics.

In face of changing impact of authorities’ policies and end users’ tepid demand, traders remained quite cautious in placing new orders for fear of risks, and they mostly anticipated further price downside revisions.

As for non-power buyers, their demand was recently dampened by lackluster markets, as cement market was hit by listless housing market and chemical industry saw falling prices.

“We cut out offers by 40 yuan/t further today as not many coal trucks come for loading. End buyers nearby are all waiting for price cuts,” said one Ordos-based miner in Inner Mongolia, adding that he offered 6,000 Kcal/kg NAR lump coal with 0.2% sulfur at 1,180 yuan/t, mine-mouth with VAT.

But the second miner contacted by Sxcoal expected limited downward room for local prices as some mines will see exhausted coal sales quotas around July 24, which will reduce supply available. The miner also noted he will only cut offers if coal stocks pile up high.

A deep price cut of 100 yuan/t was reported in 6,200 Kcal/kg NAR slack coal with 0.6% sulfur in Yulin of Shaanxi. The mine commented more attention should be focused on replenishment from power utilities around late July, and saidnoted he basically has no stock for now.

The situation is much more delightful in northern Shanxi, where supply to spot buyers stayed limited since most state-owned mines halted sales to them to ensure contract supplies. This led to low coal stocks at coal washeries and supported coal prices.

Offer prices of slack coal (CV 5,500, S 1.7%) in Shuozhou of Shanxi rose 20 yuan/t to 1,017 yuan/t, mine-mouth with VAT. “Our price is indeed high, and we will raise prices if there is demand. I thick prices are unlikely to drop,” said the miner.

Another miner also in Shuozhou offered 5,300 Kcal/kg NAR washed thermal coal with 0.3% sulfur at 950-960 yuan/t, excluding VAT. The miner told Sxcoal that he thought that prices are less likely to rise and participants should wait to see when will decline.

In the auction market, one miner in Shenmu of Shaanxi said his auction of lump coal fetched no result and slack coal (CV 6,200, S 0.6%) was firstly offered at 1,010 yuan/t. The lump coal will be re-put for the auction again, and prices of both slack and lump coal continued to fall back.