China’s spot thermal coal prices were mostly unchanged on October 25 amid thin liquidity as utilities remained in a wait-and-see approach, traders said.
On October 25, tradable prices for 5,500 Kcal/kg NAR thermal coal were around 1,620-1,630 yuan/t FOB with VAT at northern transfer ports, with offers standing still at 1,630-1,650 yuan/t.
Cargoes of 5,000 Kcal/kg NAR were mainly offered at 1,430-1,450 yuan/t, although the range was blurred because some were as high as 1,470 yuan/t and some as low as 1,420 yuan/t.
Trading activity was quiet on the whole with little demand as current prices hurt utilities’ affordability.
Power plants are loss-making at current coal prices. And most of them are reliant on term contract supplies as the fulfillment has enhanced after the government intervened last month, said a state-owned utility source based at Caofeidian port.
The additional contract supplies have become utilities’ invisible stocks, so they are not necessary to build up stocks too high ahead of the winter, according to the source.
“We’ve seen the market went through August with no clear volatilities when coal consumption was jumping to a record high,” he said. “To this end, I don’t think the market will move up further with demand being flat.”
A Jiangsu-based utility source noted his power plants have recently cut half of operating capacity because of cooling weather. Coal stockpiles were around 15 days of use.
“We have received only one cargo this month, against three under the term contract, as recent epidemic outbreak subdued coal shipments through Daqin line,” he said. “We have bought two 3,000 Kcal/kg NAR imported cargoes to fill the gap, other than pricy domestic coal.”
“The supply constraint is temporary and we believed the market will start falling as soon as Daqin resumes normal operation,” the source said.
Traders, however, insisted on a bullish market over the next few weeks, saying the winter heating season is set to start fully next month and cold fronts will force power plants in the south to restock.
“We’ll still focus on the epidemic next month. There would be a round of procurement in the mid-to-late November. But from December through the end of the year, some factories will curt or halt operation and coal prices will be struggling to move higher.”
A paper maker purchased a 5,500 Kcal/kg NAR cargo at 1,630 yuan/t on October 24, said a Zhejiang-based trader. He offered Shanxi 5,000 Kcal/kg NAR coal at 1,460 yuan/t and Inner Mongolia coal of this grade at 1,430 yuan/t, but hardly to gain attentions.
At ports along the Yangtze River, 5,500 Kcal/kg NAR coal was mainly offered at 1,660-1,670 yuan/t. “Coal stocks are above the average at these ports because coal consumption at power plants is low. Coal prices are more prone to fall than rise,” a Jiangsu-based trader said.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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