Chinese domestic thermal coal market showed signs of retreating after the central government vowed at a meeting to take measures to tackle the rising prices. Sentiment weakened in the portside market, although notable declines haven’t yet emerged.
The National Development and Reform Commission and the National Energy Administration announced mutilple measures at a conference on February 9 to prevent the inflated prices from rising further.
Measures will be implemented including adding domestic production and supply, supervising coal prices at mines and ports and crackdown on price gouging, the meeting said.
Some coal mines have responded by adjusting down prices, but most were yet to follow the order and some even maintained small rises, Sxcoal learned from miners in key producing regions.
An Inner Mongolia-based miner raised prices by 21 yuan/t for slack 5,600 Kcal/kg NAR thermal coal with 0.3% sulfur, citing ongoing appetites from chemical plants. Four other surveyed miners based in Inner Mongolia continued with a 20 yuan/t price upward correction due to sound demand, and tight supply as production hasn’t yet been fully recovered from the Lunar New Year holiday.
As per the market talk, mines need to control their prices within 700 yuan/t mine-mouth with VAT, basis 5,500 Kcal/kg NAR, as required by the NDRC, although this hasn’t yet been officially confirmed.
As of February 9, Sxcoal assessed 5,500 Kcal/kg NAR thermal coal at 933 yuan/t in Datong, Shanxi, flat from a day ago, and prices for the same grade traded in Ordos, Inner Mongolia, were assessed 848 yuan/t, a 5 yuan/t from a day earlier.
Traders reported weakened sentiment in the market compared with earlier days this week. Offers for 5,000 Kcal/kg NAR thermal coal showed a wide range between 1,000 yuan/t to 1,060 yuan/t. Trading activity remained solid with several deals concluded at 1,020-1,040 yuan/t.
“There are quite a few demands in the market after the Spring Festival, but stockpiles are not much available,” said an Inner Mongolia-based trader. “But traders dare not to give hefty offers under the government pressure. The prices would have soared otherwise.”
Power plants have enough supplies now but lack cheap cargoes, said a Jiangsu-based utility source, adding demand mainly came from plants without long-term contracts.
According to previous experience, prices will fall after the government starts to intervene in the market, but the current still tight supply at ports, coupled with recovery of industrial activity after the holidays, may slow the downtrend at the portside market.
As of February 10, coal stockpiles at Qinhuangdao port were around 4.9 million tonnes, up from 4.69 million tonnes a day earlier and a recent low of 4.02 million tonnes on January 28. but still lower than the year-ago level of 5.06 million tonnes.
Feeling the government’s pressure on spot market, the futures market fell by 2.61% or 22.6 yuan/t from a day earlier to close at 843.6 yuan/t on February 10 on the Zhengzhou Commodity Exchange.
On February 10, Sxcoal assessed the spot prices of 5,500 Kcal/kg NAR thermal coal traded at northern ports, or the CCI 5500 index, at 1,045 yuan/t, flat from a day ago. The CCI 5000 index, gauging the spot prices of 5,000 Kcal/kg NAR, was 960 yuan/t on the same day, also unchanged.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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