China’s domestic thermal coal prices continued to fall at the beginning of this week as market rumours said the government is planning to revise down the benchmark price for 2022 term contracts.
It was heard that the National Development and Reform Commission (NDRC), the nation’s top economic planner, discussed lowering the benchmark price from 700 yuan/t to 675 yuan/t FOB at northern transfer ports, at a meeting on the morning of December 27.
Early this month, the NDRC proposed a pricing mechanism for 2022 long-term contracts, setting the benchmark price at 700 yuan/t plus a fluctuation of 150 yuan/t to either direction.
The new benchmark price jumped more than 30% from the existing one that has been adopted since 2017. Some power producers claimed they could not afford cargoes at such high prices, and insiders noted 800 yuan/t is a watershed that separates earnings from losses.
Market talk also said top producer CHN Energy, or Shenhua, would cut its third-party coal purchase price, basis 5,500 Kcal/kg NAR, by as much as 100 yuan/t for the coming shipment period of December 28-January 3.
Such rumors have hit the market sentiment badly. Traders began to dump cargoes at northern ports, helping drive down the overall offers in the market. Prevailing offers for this grade stood around 880-890 yuan/t, compared with 910-920 yuan/t late last week.
A 5,500 Kcal/kg NAR cargo with 0.6% sulfur changed hands at 870 yuan/t FOB on December 27, falling by 20-30 yuan/t from late last week.
“Even though the loading is imminent, buyers can still clinch deals at 850-860 yuan/t,” said a Shanxi-based trader, citing improved supply of high-CV cargoes and sellers’ urgent dumping.
With anticipated large decline in Shenhua’s purchase prices, spot offers are expected to fall below 850 yuan/t in a couple of days, another stated.
Cargoes of 5,000 Kcal/kg NAR thermal coal were offered at 770-790 yuan/t, down from 810-820 yuan/t late last week. There were more cargoes of 5,000 Kcal/kg NAR cargoes available at ports relative to 5,500 Kcal/kg NAR coal. Some buyers bid this grade at 730-740 yuan/t.
A similar situation was seen in the mine-mouth market. Some miners cut their prices by 100 yuan/t during the weekend due to low sales. A few buying interests were heard in the market, mainly from nearby non-power industrial factories.
On December 27, Sxcoal assessed 5,500 Kcal/kg NAR thermal coal at 690 yuan/t in Ordos, Inner Mongolia, and 750 yuan/t in Datong Shanxi, down 17 yuan/t and 30 yuan/t from late last week; 5,800 Kcal/kg NAR coal produced in Yulin, Shaanxi province was assessed at 865 yuan/t, down 27 yuan/t.
Continued improvement in supply-demand fundamentals is the major factor behind the price falls at ports and mines.
Daqin, the backbone railway connecting mines in major producing areas and northern ports, delivered a total of 381.45 million tonnes of cargoes in the first 11 months, a rise of 3.91% year on year, reversing a downward trend over the same period in 2018-20.
On December 27, Sxcoal’s CCI 5500 index came in at 872 yuan/t FOB with VAT, down 35 yuan/t from 907 yuan/t on December 24. The CCI 5000 index stood at 771 yuan/t, down 30 yuan/t.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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