Chinese coal miners and local authorities have been cranking up for implementation of the price formation mechanism for medium- and long-term thermal coal contracts, which is set to take effect on May 1.
Logistics and trading firms under a state-owned mining group were required by the parent company to reduce their stocks at mines and ports as well as en-route tonnages to the lowest by the end of April, as selling prices would fall when the new pricing mechanism comes into force.
The eastern province of Anhui unveiled a plan to guide the prices of indigenous coal to fluctuate reasonably under the central government-set contract pricing framework, where indigenous coal prices should be within 545-745 yuan/t, basis 5,000 Kcal/kg NAR, with VAT.
The price range is set based on the principle that indigenous contract prices are on par with the delivered prices of coal from Shaanxi, Shanxi, and Inner Mongolia, according to the plan, which will also be implemented from May 1.
Anhui is a major coal-producing province in East China, with Huaibei Mining Group and Huaihe Energy Group among the top miners.
Anticipating a price decline with the contract pricing mechanism taking effect officially, the sentiment in the spot market weakened and prevented spot prices from rising. Participants had expected purchases prior to the May Day holiday could bolster prices.
Offers for the benchmark 5,500 Kcal/kg NAR thermal coal were centred in 1,120-1,170 yuan/t FOB northern ports with VAT on April 26, down slightly from 1,150-1,160 yuan/t a day earlier; cargoes of 5,000 Kcal/kg NAR were mainly offered at 930-980 yuan/t, compared from 980-1,000 yuan/t.
Bidding prices for 5,000 Kcal/kg NAR coal fell to around 900 yuan/t from 930-940 yuan/t in the previous day. A 1%-sulfur cargo changed hands at 930 yuan/t.
A Jiangsu-based utility purchased 5,000 Kcal/kg NAR coal at 1,019 yuan/t on April 25, DDP with VAT, which nets back to a FOB price between 970 and 980 yuan/t. In comparison, a southern power plant awarded four cargoes of this grade on April 26 at 948 yuan/t for prompt delivery, although such a low price can hardly get deals done at current market.
Power plants in East China’s Shandong province depressed their term contract prices by 20-70 yuan/t over the past three days for deliveries from April 25 to May 24. One plant pegged the contract price at 959 yuan/t with VAT for 4,500 Kcal/kg NAR coal on a DDP basis.
With the pandemic restrictions still weighing on coal consumption, most coastal power plants saw their stockpiles above reasonable levels. As of April 26, the six major coastal power groups had 11.53 million tonnes of coal in stock, enough to cover 17 days of generation, compared with 11.35 million tonnes and 16 days, respectively, a week ago.
On April 26, the most-traded thermal coal contract on the Zhengzhou Commodity Exchange rose 0.22% to close at 815 yuan/t.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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