- Capacity utilisation rates at mines rise w-o-w
- Muted demand, slow sales prompt price drop
Mysteel Global: China’s thermal coal production has rapidly rebounded after the Chinese New Year holiday (28 January-4 February), exacerbating the ongoing oversupply issue, as post-holiday demand recovery is proving elusive, leading to a significant drop in prices, according to Mysteel’s monitoring data.
During 7-13 February, the average capacity utilisation rate among the 462 thermal coal mines surveyed by Mysteel across the country had surged to 93.3%, a substantial jump from 80.7% the previous week and 75.3% two weeks earlier.
These mines, with a combined production capacity of 2.11 billion tonnes (bnt)/year and accounting for about 65% of China’s total, produced an average of 5.61 million tonnes (mnt)/day over the week. This represents a 15.2% increase from the previous week and a 23.9% jump from two weeks earlier.
The swift return of coal manufacturing was noted in major producing regions, including Shaanxi province in northwestern China, where the average capacity utilisation of Mysteel’s sampled mines had risen to 90% as of 13 February, from 69.1% during the week prior. Most private mines reopened their gates by the Lantern Festival (12 February) and have been gradually returning to full production.
However, despite the sharp increase in supply, thermal coal demand remained subdued during the week of 7-13 February. In Shaanxi, local sales were sluggish, with only chemical factories purchasing a few cargoes for essential needs, survey respondents said. With trading at northern transfer ports being listless following the holiday, local wholesalers refrained from purchasing significant quantities from mines. As a result, coal prices in Shaanxi dropped by RMB 10-31/tonne (t) ($1.4-4.3/t) in mid-week auctions on local trading platforms.
In Inner Mongolia in North China, another key producing hub, the situation was similar. Nearly all coal mines in the region resumed operations after the holiday, with Mysteel assessing the capacity utilisation rate in sampled mines at 85.7% during the 7-13 February week, up from 71.9% the week before. Local demand was equally weak, leading to a price drop of RMB 10-30/t in spot sales, Mysteel reported.
On 14 February, Mysteel assessed 5,800 kcal/kg NAR coal in Yulin, Shaanxi province, at RMB 570/t, lower by RMB 60/t from the previous week, while 4,600 kcal/kg NAR coal in Ordos, Inner Mongolia, was at RMB 335/t, reflecting an RMB 15/t drop w-o-w.
Looking ahead, with more mines returning to operation this week, the overall supply of thermal coal is set to rise further. As temperatures begin to climb, demand for steaming coal among power plants is likely to wane, exacerbating the existing supply-demand imbalance and putting additional downward pressure on prices.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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