China’s thermal coal prices remain stable despite record high power demand

China’s thermal coal prices remained range-bound although the persistent heatwave sent power demand soaring in the east and south as more contracted coal supplies have weakened utilities’ spot buying.

On July 13, offers for 5,000 Kcal/kg NAR thermal coal still hovered around 1,100 yuan/t FOB with VAT at northern transfer ports, while the benchmark 5,500 Kcal/kg NAR was mainly offered at 1,250-1,260 yuan/t, almost unchanged from a day earlier.

With strengthened contract supplies, utilities in the coastal region were in no rush to restock from the spot market, despite a visible decline in their stockpiles due to the scorching temperatures.

Shanghai, Jiangsu and Anhui in eastern China separately reported the highest power demand on July 12.

Shanghai issued the red alarm on super high temperature, the highest rank in a color-coded warning system, on July 12 when the temperature reached 40.9 Celsius, the highest since 1873. On the same day, the grid load reached 36.41 GW, the highest ever in history.

The maximum grid load in Jiangsu hit a new high of 126 GW on the day, with the power demand staying above 100 GW for 24 days in a row. Hefei, the capital city of Anhui province, also reported a record load of 10.13 GW, spiking 15.9% from last summer.

Unlike “swarming to purchase” in previous months, utilities were not so worried about their stockpiles though the demand was soaring, said a state-owned utility source, as the fulfillment of contract supplies could be guaranteed.

“Our group will stop purchasing spot coal from July as more contracts will be delivered. Contracts with no requirement of the fulfillment rate have been resigned,” he added.

The harsher requirements on contract compliance can be reflected at some mines, which recently announced to pivot all spot supply to honor their annual contracts.

Coal miners had been ordered to sign more contracts ahead of July 8 to compensate the volume they failed. Contracts with prices exceeding the government caps were also asked to be revised.

A Hunan-based branch of another state-owned power group planned to purchase a spot cargo of 5,000 Kcal/kg NAR at 1,080 yuan/t while the supplier wanted to sell at 1,120 yuan/t, resulting in a failure to make it happen due to the wide price gap.

Jingtang port registered a deal for 10,000 tonnes of 5,000 Kcal/kg NAR coal with 0.8% sulfur at 1,100 yuan/t on July 12, reported a Hebei-based trader.

A Jiangsu-based trader bid Shanxi 5,000 Kcal/kg NAR with 0.8% sulfur at 1,130 yuan/t for an emergency purchase as his vessel was to leave immediately. The bid was far from general bids from 1,050 yuan/t to 1,080 yuan/t at northern ports for this grade.

Cargoes of 4,500 Kcal/kg NAR were mainly offered at 960-980 yuan/t, an Inner Mongolia-based trader said.

Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.

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