China’s portside thermal coal prices continued moving downward on November 11, as the market became more bearish after a state-owned utility finished a domestic spot tender, while the news of eased COVID-19 rules may thrill the market.
On November 11, prevailing offers for the benchmark 5,500 Kcal/kg NAR thermal coal reached 1,500-1,520 yuan/t, FOB with VAT at northern ports, compared with around 1,530 yuan/t a day ago; 5,000 Kcal/kg NAR coal was primarily offered at 1,300-1,310 yuan/t, down from 1,320-1,340 yuan/t the previous session.
Traders became more skeptical if the market will stay resilient, following results of a tender issued by a Zhejiang-based power group were known to the market. Sources said the utility awarded a 5,500 Kcal/kg NAR cargo at 1,499 yuan/t FOB and two 5,000 Kcal/kg NAR cargoes at 1,310 yuan/t and 1,317 yuan/t, respectively.
Some traders have started offering to the group at 1,270 yuan/t, basis 5,000 Kcal/kg NAR, one source disclosed, declining to give details about laycans and specifications.
“The domestic market could keep going down through the middle of December,” said a Hebei-based trader. “Utilities may start a wave of buying ahead of the Chinese Lunar New Year.”
The trading atmosphere is typically muted on Friday as traders wait for weekly pricing indication from a state-owned mining group, which is often deemed as a key clue for the spot market change next week.
“We sold a 5,000 Kcal/kg NAR cargo at 1,340 yuan/t yesterday (Nov 10), but today this is unlikely to happen,” said a Shanxi-based trader.
Despite a commonly-held gloomy demand outlook, expectations of the government to ease COVID-19 rules may give a fillip.
On November 11, the Chinese government announced to ease its COVID-19 response measures to restore the economy and optimize its epidemic control.
Under the new rules, centralized quarantine times for close contacts and travelers from abroad were shortened from seven to five days, although requirement for three further days in home isolation remains.
China will also stop trying to identify “secondary” contacts – a major annoyance for urban residents who find themselves caught up in sweeping contact-tracing efforts when a case is found – while still identifying close contacts.
Also, China is adjusting its categorization of COVID risk areas to simply “high” and “low” risk – eliminating the “medium” category, an effort to minimize the number of people coming under control measures.
The loosened epidemic rules will contribute to economic rebound, but it remains to be seen how much it will spur the coal demand, given high stockpiles at power plants and steady supplies under term contracts.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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