China’s portside thermal coal continued moving lower on November 10, extending a two-week decline amid lackluster demand from utilities as long-term contracts are well delivered.
Following a 10-yuan/t decline in the previous session, prevailing offers for the benchmark 5,500 Kcal/kg NAR thermal coal dropped by 5-10 yuan/t to 1,530 yuan/t, FOB with VAT, at northern ports on November 10.
Cargoes of 5,000 Kcal/kg NAR coal were primarily offered at 1,320-1,340 yuan/t, shedding from 1,340-1,350 yuan/t a day earlier. A few bids have touched 1,300 yuan/t.
On November 10, three 5,000 Kcal/kg NAR cargoes were traded at 1,335 yuan/t FOB, and 10,000 tonnes of this grade was sold at 1,330 yuan/t, according to traders.
Some traders were concerned that large-scale spot procurements are less likely to happen in the remaining months of this year, as current spot prices are much higher than contract prices. Earlier, some insiders said power plants will remain in profit only if the coal cost is no higher than 800 yuan/t.
Beyond that, traders explained, utilities can maintain their stockpiles only by depending on arrivals of term contracts since the authorities strengthened supervision on contract fulfillment after the spot price rallied to 1,650 yuan/t in mid-October.
Coal production has kept at a high level in China’s major producing areas, little affected by COVID-19 outbreaks.
Sxcoal’s survey showed the utilization rate of 100 coal mines in Shanxi, Shaanxi and Inner Mongolia – with combined capacity of 575.9 Mtpa – reached 93.9% in the week ending November 9, up from 93.15% a week earlier. Their weekly output hit 11.47 million tonnes, a 0.8% rise week on week.
Warmer temperatures have driven down coal consumption at power plants in the south, resulting in higher-than-average stockpiles. Data showed major coastal power plants now have stocks enough to cover 18 days of use.
China could experience a warmer winter, except for some northern regions, reducing coal burns in the heating period.
Coastal cement plants, according to a Guangdong-based trader, preferred cost-effective Russian coal. “Cement plants have significantly ramped up Russian coal purchases this year. Currently, Russian 5,500 Kcal/kg NAR is traded at 1,530 yuan/t CFR South China with VAT, compared with 1,580-1,590 yuan/t of domestic coal at southern ports.”
“Russian coal purchase is expected to increase further next year as the share of term contracts to the cement sector will drop further,” he added.
However, by far, no fundamental price corrections have occurred in the domestic market, which varied from the global market. Newcastle contracts on the ICE plunged 28% to $330/t from the record $460/t in early September.
This is because mine-mouth prices haven’t dropped extensively, supporting traders’ cost and preventing them from cutting prices quickly.
Among those 100 surveyed coal mines, Sxcoal found 84 of them maintained prices stable in the week to November 9. Only seven mines raised prices by an average of 22.6 yuan/t, compared with 75 yuan/t a week earlier; nine mines cut prices by 44 yuan/t averagely against 43.9 yuan/t a week ago.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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