China’s domestic thermal coal prices jumped on August 29, as heavy rain and COVID-19 lockdowns hampered supply at a time when industrial consumption started to improve.
Offers for 5,500 Kcal/kg NAR thermal coal prices reached 1,250-1,280 yuan/t FOB with VAT at northern transfer ports as the week started, up from 1,210-1,220 yuan/t late last week. Tradable prices reached 1,250 yuan/t, according to traders.
For 5,000 Kcal/kg NAR coal, offers rose to 1,100-1,130 yuan/t FOB at ports, against buying interest of 1,090 yuan/t. Large spread between offers and bids curtailed transactions, but some deals were still made at high prices.
Following shutdown of some coal mines and highways in Yulin, Shaanxi province, local energy authorities in some places of Ordos, Inner Mongolia, closed trading systems for all local mines until September 1, as new COVID-19 cases are being detected. Local miners reported many truckers were reluctant to come because of complicated inspection procedures.
Heavy rainfall also weighed on production and logistics in Yulin and other places in Shaanxi.
Portside traders noted spot supply became scarce, especially for high-CV cargoes, whose prices were rising more rapidly.
A Hebei-based trader reported a deal of Shaanxi 5,500 Kcal/kg NAR cargo was concluded at 1,250 yuan/t.
“The supply tightness may continue next month when Daqin railway is scheduled to undergo partial maintenance,” he said. The railway is scheduled to undertake maintenance every Tuesday (2.5 hours in the morning) and Sunday (2 hours in the midnight) in September.
A Qinhuangdao port-based trader received a bid of 1,250 yuan/t FOB for 5,500 Kcal/kg NAR with 0.4% sulfur, but had no coal in stock, which he blamed for slower-than-normal stock-up.
“This month we only have 15 trains arriving at the port, down from normally 40-50 trains a month,” he said. “At first we took the lead to cut railings because of the cost. Then the rain and the epidemic slowed the transport.”
A Dalian-based trader sold a 5,000 Kcal/kg NAR coal with 0.6% sulfur at 1,130 yuan/t.
Another reason to bolster the market was revived demand from cement makers. A Zhejiang-based trader reported inquiries and trades increased in the market. “Some cement makers are scrambling for high-CV cargoes with generous prices, about 1,250 yuan/t for low-sulfur 5,500 Kcal/kg NAR cargoes, but most buyers can only give no more than 1,230 yuan/t.”
This demand fills a gap left by utilities which slowed purchases because of falling consumption. Daily coal burn at coastal power plants eased to a level in early July and their stockpiles have rebound close to 14 days of use.
Market sources said power supply have restored to all industrial end users in Sichuan, which was most hit by the heatwave and drought in China. Local power supplier said air conditioning demand has declined significantly since late last week with falling temperature.
Due to a fall in demand from the power sector, vessel freight rates fell from northern ports to the south. As of August 29, the shipping rate for 60,000-70,000 DWT vessels from Qinhuangdao to Guangzhou dropped to 41 yuan/t, the lowest since June 30 and down 22% from a week earlier.
At ports along the Yangtze River, offers for 5,500 Kcal/kg NAR coal were at 1,290-1,300 yuan/t FOB with VAT, which net back to 1,240 yuan/t FOB northern ports, with the buying mainly coming from non-power users.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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