China’s portside thermal coal market witnessed another downward session on November 25, extending the losing streak since late October, as COVID outbreaks prompted the government to tighten restrictions, which not only affected coal transport at mines but also weakened demand.
On November 25, the benchmark 5,500 Kcal/kg NAR thermal coal was mainly offered at 1,280-1,300 yuan/t FOB with VAT at northern transfer ports, down from around 1,300 yuan/t a day earlier; offers for 5,000 Kcal/kg NAR fell to 1,080-1,100 yuan/t, a 10-20 yuan/t drop day on day.
Cargoes of 4,500 Kcal/kg NAR coal were offered at 945 yuan/t FOB. Trades were already concluded at 943 yuan/t FOB, suggesting the tradable prices have fallen below the government cap of 945 yuan/t.
After days of price decline, inquiries have improved in the market, but the overall trading atmosphere remained weak and downstream buyers kept pressing down prices hard. Traders expected weather to turn colder next week in southern parts of the country, but this didn’t help bolster the market.
Coal stockpiles are climbing fast at northern ports. As of November 24, stockpiles of the three northern ports (Qinhuangdao, Jingtang and Caofeidian) totaled 19.2 million tonnes, up 1.1% from a day earlier and 12.2% from a week earlier.
High stockpiles are mainly due to strong inbound deliveries, as coal railings via Daqin railway are gradually recovering from the previous COIVD outbreak.
The majority of coal railings are supplies under term contracts. The government prioritizes term contract supply by rail.
Spot supply, however, has been heavily curbed by strict COVID-19 restrictions. A portside trader told Sxcoal that many coal mines in Shanxi had huge backlogs as trucks, except those for delivering contracts, were banned from entering to reduce the virus spread. Brokers doing business at rail stations have accumulated a lot of coal at warehouses, which has incurred big storage costs.
A lack of spot supply caused more traders to blend low quality coal with the premium one. Trades of blended cargoes at northern ports also helped to drag down the market prices.
Traders expected spot prices to fall further even as some demand would emerge later to prepare for colder temperatures. They said the 5,500 Kcal/kg NAR coal would continue to fall until at least the government price cap of 1,155 yuan/t.
Tightened COVID measures
Amid surging infections recently, China has tightened COVID-19 control curbs, dashing the hope that the country may soon ease restrictions to boost its economy.
The resurgence of COVID cases in China, with 32,695 new local infections recorded for November 24, has prompted widespread lockdowns and other curbs on movement and business.
Large cities including Beijing, Guangzhou and Shanghai are said to tighten curbs, casting a shadow over the economic recovery.
In major producing regions, Inner Mongolia, Shanxi and Shaanxi adopted lockdowns on parts of producing areas, more intense and longer than previous times. Ordos in Inner Mongolia is heard to start a nine-day zero-COVID campaign. In response to this, 180 washing plants in Ejin Horo banner and 280 in Zhunge’er banner were asked to stop production and sales until the local epidemic is contained.
In addition, the Zhunge’er government banned trucking of spot coal but tried to keep contract shipments going, which led to continued reduction in spot demand and a sharp drop in local prices.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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