China’s thermal coal prices kept moving upward at the start of this week, backed by positive near-term demand outlook, although supply has recovered from the recent rainfall.
On August 22, offers for 5,500 Kcal/kg NAR thermal coal were 1,170-1,190 yuan/t at northern transfer ports on a FOB basis with VAT. Some traders even offered the material as high as 1,200 yuan/t. Cargoes of 5,000 Kcal/kg NAR coal were mainly offered at 1,060-1,090 yuan/t against the bids of 1,040-1,060 yuan/t.
Portside traders were not in a hurry to sell as they expected further price rises with the heatwave likely to last for at least 10 days more before cooling down, said a Hebei-based trader.
After receiving a cargo of Inner Mongolia 5,000 Kcal/kg NAR coal with 0.8% sulfur at 1,040 yuan/t late last week, the trader was planning to sell it at 1,060 yuan/t, a price appealing to end buyers.
Traders also deemed the cost rise as a driver to the market, citing the continuous price rally at mines. Coal prices increased by 20-40 yuan/t as the week kicked off in Yulin, Shaanxi province, driven by growing demand from end users including chemical and steel makers. With new COVID cases confirmed in the coal hub, local authorities have adopted strictly proactive measures, which curbed local logistics.
Ordos in Inner Mongolia saw most of coal mines restarted working after the recent rainfall. Local meteorological center forecast rains to continue in the next two days but the magnitude has abated a lot. Some coal miners resumed production from the rain and came up with another round of price rally.
An Inner Mongolia-based trader reported difficulty to obtain cargoes at below 1,060 yuan/t FOB for 5,000 Kcal/kg NAR. “Some traders are betting on the market developments by refusing to sell at current prices, as saleable cargoes are limited and the cost is high.”
A second Hebei-based trader received an offer of 1,080 yuan/t for Inner Mongolia 5,000 Kcal/kg NAR coal with 0.5% sulfur, adding the price was already accepted by some buyers. He also reported several offers of 1,190 yuan/t for 5,500 Kcal/kg NAR, citing the ongoing heat in the south.
There were quite a many cargoes to be offloaded at Guangzhou port, most of which were already bought by large state-owned utilities. However the newly-formed typhoon could curb discharges.
“While the overall stockpiles stay high, some state-run utilities have very low stocks,” said a Guangdong-based utility source. His power plant was issuing tenders in recent days, both for domestic and imported cargoes.
“The delivery of long-term contracts is affected as more supplies are directed to the southwestern region. Previously, we can get high-CV cargoes as contracted, including 5,000 Kcal/kg and 5,500 Kcal/kg NAR grades, but now we can only receive cargoes with the CV between 4,000 Kcal/kg and 4,500 Kcal/kg NAR,” he said.
As of August 11, the daily coal burn at the six major power groups along the southern and eastern coasts remained above 900,000 tonnnes, despite a 1% fall from a week earlier. There stockpiles now could maintain 12.5 days of use compared with 12.2 days a week ago.
High as the stocks may seem, coal stockpiles are falling fast at certain power plants and will be quicker in the near term as the high-temperature weather continues, a Qinhuangdao-based trader said.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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