Spot thermal coal prices floundered again at northern China ports, as traders looked past temperature drops and cautioned tepid demand to close out 2022.
The government’s efforts to guarantee effective supply throughout the winter heating period also fuelled bearish sentiment in the spot market.
Following a 10 yuan/t fall a day earlier, offers of 5,500 Kcal/kg NAR thermal coal dropped another 10-20 yuan/t to 1,280-1,310 yuan/t FOB with VAT at northern ports on December 21. The slump marked a seventh consecutive day of declines.
Offers for 5,000 Kcal/kg NAR grade were centred in 1,090-1,110 yuan/t FOB, down from 1,130-1,150 yuan/t a day ago; 4,500 Kcal/kg NAR was offered at 970-990 yuan/t, compared with 980-1,000 yuan/t in the previous day.
From December 16, the second cold snap this winter has brought a substantial temperature drop to the southern region. Utilities accelerated coal consumption to catch up with higher heating demand.
This, however, helped little to trigger buying interest from utilities, which had already advanced procurement in late November when the first cold snap hit the region.
Liquidity remained sluggish with some trades heard sporadically. The buying interest mainly came from utilities and cement factories with pressing need of restocking, while the majority was standing on the sidelines, waiting for further price declines.
Currently, the 5,500 Kcal/kg NAR prices are still much higher than the government-set price cap of 1,155 yuan/t FOB for trades done at northern ports. Utilities expected further declines to ease operating pressures.
A Zhejiang-based utility bought a 5,500 Kcal/kg NAR cargo at 1,285 yuan/t FOB, reported a Fujian-based trader who did not give details. The trader also learned some 5,000 Kcal/kg NAR deals were done below 1,100 yuan/t.
“Today two cement factories issued tenders but results haven’t been available,” the trader said. “Actually, cement producers are not in a good position constrained by the real estate market and the seasonal slackness,” he added.
Recently, cement prices in Yunnan, Fujian, Jiangsu among other places have sagged by about 30 yuan/t. Industry insiders said slowed construction activity and immigrant workers’ leave for the Lunar New holiday would make it hard to rebound in the first quarter next year. Some listed cement companies were generally optimistic about the market from the second quarter onwards.
A Shandong-based trader heard some 5,000 Kcal/kg NAR cargoes with 0.6% sulphur were offered at 1,100-1,120 yuan/t FOB, while a buyer counted at 1,080 yuan/t.
“Omicron infections are curtailing activities in both supply and demand sides. We heard some coal mines are shut down due to infections,” he said. “There are portside traders planning to sell at a lower price before the end of this week, which will further weigh on the market,” he added.
At the producing regions, Sxcoal learned a 30 yuan/t decline at some mines in Yulin, Shaanxi province, as the epidemic curtailed transport and resulted in higher stockpile at mines.
Yulin’s local economic planning agency expected coal prices to fluctuate within a narrowed range in December, following a shallow decline in November, citing weakened demand.
The National Development and Reform Commission recently affirmed that the overall energy supply is abundant and can well cover people’s heating need throughout the winter.
In January-November, China’s coal production jumped 9.7% from the same period last year. Coal stocks exceeded 176 million tonnes at power plants across the nation, a significant rise y-o-y.
Also, daily coal railings via Daqin line have recently resumed to the normal level of 1.2-1.3 million tonnes, according to data tracked by Sxcoal.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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