China’s thermal coal market has been fluctuating slightly with trading activity stagnating in a delicate balance between supply and demand.
As the new month starts, fundamentals are changing but not strong enough to move the market one way or another. Views varied about the market direction, though the bearish prevailed.
On November 1, offer prices for 5,500 Kcal/kg NAR thermal coal were around 1,595-1,620 yuan/t, a little higher than a day ago; 5,000 Kcal/kg NAR cargoes were generally offered at 1,380-1,400 yuan/t, both on FOB basis with 13% VAT at northern transfer ports.
The market saw few transactions today, except for a few buyers with pressing need. An eastern China-based utility yesterday bought two 5,000 Kcal/kg NAR cargoes with 0.6% sulfur at 1,380 yuan/t and 1,390 yuan/t, respectively.
Strict COVID-19 measures kept constraining coal transport in some producing places, which caused inventory backlogs and affected extraction, but the overall production and supply have been maintained at a normal level.
Daqin line’s coal transport improved, with the daily volume rising to 450,200 tonnes on October 31 from 320,000 tonnes a day earlier, but far below its normal level of 1.3 million tonnes, reflecting still weak supply towards northern ports.
However, under the government’s policy to ensure energy supply during the winter heating season, the country’s coal production has a bigger chance to increase in the remaining two months. In this case, supply under term contracts will be well guaranteed and the spot supply will increase to some extent.
Things were not too good demand-wise, evidenced by decreased outbound flows, although this was also partly due to gales that slowed down vessel loading. On October 31, there were 0.8 million tonnes of coal shipped out of the three northern ports (Qinhuangdao, Caofeidian and Jingtang), down from 1 million tonnes a week earlier and 1.5 million tonnes a month earlier, Sxocal data showed.
Market sources said utilities have generally suspended spot buying and depended on contract supplies to maintain inventory. Currently, coastal plant inventories are enough to cover more than 18 days of consumption, a comfortable level that makes utilities not eager to restock.
Weakened market sentiment prompted some traders to cut prices to accelerate sales, while some others insisted on holding back with the support of costs as prices haven’t seen widespread declines at mines.
Northern China has already started heating but their stocks are generally above previous targets. Coal stocks are around 15 days of use in the Beijing-Tianjin-Hebei region, while the overall coal storage surpasses the 50% target in the three northeastern provinces.
Meanwhile, coal mines have made tailored plans to cover coal demand for heating purpose, with the implementation to be strictly supervised by the government.
Also, cement and steel industries in the north started the dormancy on environmental concerns, suggesting a weak demand in the non-power sector.
As such, it is less likely to see a strong wave of buying in the near term, or perhaps through the end of the winter if the weather is not too bad.
However, the market is not without a positive signal. With the nationwide implementation of economic incentive policies, China’s economy may gather pace and drive up energy consumption.
At the same time, some utilities still need to buy high-CV spot cargoes to balance their stock structure. And coal consumption will increase further if extreme weather occurs.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
Leave a Reply