China’s thermal coal prices continue to fall despite hot weather

China’s thermal coal prices deepened the decline at the beginning of this week as demand remained lackluster, although high temperatures are forecast to continue in the coastal region, traders said.

On July 25, offer prices for the benchmark 5,500 Kcal/kg NAR thermal coal fell to around 1,200 yuan/t, down from 1,230-1,250 yuan/t late last week; 5,000 Kcal/kg NAR was primarily offered at 1,050-1,060 yuan/t, down from 1,070-1,080 yuan/t on July 22, according to traders.

Current benchmark prices, however, still were higher than the government’s cap of 1,155 yuan/t for spot deals at northern ports.

With steady supply through long-term contracts, some utilities have reduced their spot procurements to a need-to basis, while more others simply put buying on hold and rely only on contract supplies to maintain stockpiles.

Meanwhile, some coastal power plants were seeking low-CV imported coal to blend with high-CV contract coal, which led to a slight pickup in Indonesian thermal coal last week.

Last week, traders started reducing offer prices to elicit end buyers, on concerns of a significant price fall when the summer heat fades away.

Weakened demand from industrial factories also contributed to the price decline, with the cement sector reporting factories on seasonal suspension in many places.

As of July 24, the daily coal burning at the six major coastal power plants touched a multi-year high of 903,500 tonnes, while stockpiles at Qinhuangdao port stood at 5.85 million tonnes, still at a high level with an increase of 67.14% from a year earlier, despite a 4.88% fall from a week earlier.

A 5,500 Kcal/kg NAR thermal coal cargo with 1.3% sulfur was offered at 1,200 yuan/t FOB Caofeidian port with VAT, a Guangdong-based trader said. He also reported the latest offers he received were around 1,050-1,060 yuan/t FOB northern port, and 4,500 Kcal/kg NAR coal was offered at 945-950 yuan/t.

“The market is too weak,” said a Jiangsu-based trader after he was told by a potential buyer to delay purchase when the offers for 5,500 Kcal/kg NAR fell below 1,260 yuan/t FOB ports along the Yangtze River, which net back to 1,210 yuan/t FOB northern ports.

A Shanxi-based trader complained the downstream buyers pressured the prices too hard. “The 5,500 Kcal/kg NAR with 1% sulfur is only offered at 1,195-1,200 yuan/t and I heard a deal concluded at 1,030 yuan/t for 5,000 Kcal/kg NAR.”

An Inner Mongolia-based trader locked three cargoes with the downstream, with 5,000 Kcal/kg NAR at 1,045 yuan/t and 4,500 Kcal/kg NAR at 935 yuan/t. “All traders want to sell, but there is few buying appetite.”

On July 25, the most-traded contract on the Zhengzhou Commodity Exchange closed at 850 yuan/t, up 2.2 yuan/t or 0.26% from a day earlier.