China’s metallurgical coal prices are expected to continue rising, driven by the possible stronger replenishing demand from the downstream coking plants, some of whose feed coal inventories fell significantly to low levels.
Sxcoal learned coking coal inventories held by some coke producers could only cover around one week of usage and a few even lower at around 3-5 days, which suggests their restocking demand for the material would be large in the near term.
However, some coke producers may increasingly find it difficult to build stocks efficiently in a time when high-quality coking coal supplies were tight at production areas and traders accelerated purchases for bargain hunting.
Sxcoal data showed on February 24, raw coking coal production at the surveyed mines climbed 0.17 million tonnes week on week to 9.43 million tonnes, and the capacity utilization at these mines increased 1.66 percentage points to 93.68%.
Despite higher output, coal inventories at these mines declined. The raw coal stocks dropped 0.49 million tonnes on the week to 2.27 million tonnes on February 24 and washed coal inventories fell by 0.45 million tonnes to 1.56 million tonnes, according to Sxcoal monitoring data, partly suggesting demand was relatively robust.
Strong purchases by coking plants have fueled a 350 yuan/t increase in some offers of low-sulfur primary coking coal (S 0.5%, G 85) in Gujiao from Taiyuan in Shanxi to 2,750 yuan/t, ex-washplant with VAT and on banker’s draft, which added the total rise to 550 yuan/t so far in the month.
Offers of fat coal (S 0.8%, A 12%) in Wuhai of Inner Mongolia stood at 2,300-2,350 yuan/t, ex-washplant with VAT, up by around 300 yuan/t compared with the levels offered on February 11.
Besides high-quality coal, prices of coking coal used for blending also increased.
An offer of 1/3 coking coal from a Linfen-based washing plant in Shanxi increased by 150 yuan/t to 2,300 yuan/t, VAT included.
One Yan’an-based mine in Shaanxi adjusted up the washed gas coal price by 100 yuan/t to 1,850 yuan/t on February 28, ex-washplant with VAT, Sxcoal learned.
The prices of imported Mongolian coking coal traded higher at Ganqimaodu border crossing in Inner Mongolia due to limited supplies and the pandemic-induced tight transportation restriction in the region.
“Offers of Mongolian raw #5 coking coal has climbed to 2,050 yuan/t, up from 1,800 yuan/t in the first week after the Spring Festival,” said one local trader source. “Although demand is firm, the transportation restrictions have greatly hindered the traffic from the border port to southern consumption areas,” he noted.
“Coking coal prices have increased more than coke prices, which would inevitably trigger a further coke price hike to pass on the raw material cost to the downstream users,” said one Luliang-based coke producer in Shanxi.
Offers of some coking coal grades have even exceeded the levels before the Spring Festival, bringing some coking plants back to losses and weakening production enthusiasm. Some coke producers were heard to have maintained production curbs due to low margins and planned to propose to increase offers by another 200 yuan/t.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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