After being muted for weeks, the Chinese domestic thermal coal market saw the trading activity warm up again as cold weather prompted utilities to restock to cope with the potential cold snap that would fast draw down their inventories.
This also came as some provinces asked local utilities to raise stockpiles to more than 20 days of consumption, and some southern provinces are gradually lifting restrictions on industrial power use.
So far this week, the number of vessels arriving at the Bohai-rim ports has increased significantly. As of November 23, there were 180 vessels anchored off Qinhuangdao, Jingtang and Caofeidian ports, Sxcoal data showed. That’s the highest so far this year and even surpassing the busiest days in early January. Bad weather-induced slowdown in vessel loading also contributed to the increase.
Coastal freight rates also climbed to the highest in the past decade. Freight rates for 50,000-60,000 DWT vessels carrying coal from Qinhuangdao to the southern port of Guangzhou were 90 yuan/t as of November 23, according to Sxcoal. This was the highest since the freight rates were recorded on the route in 2012, compared with 82.1 yuan/t a week ago and 74 yuan/t a month ago and 42.1 yuan/t the year prior.
Currently, stockpiles at coastal power plants in the south and east are enough to cover 10-15 days of use, but may drop below 10 days should supplies be disrupted in foggy and windy days.
While most utilities have signed long-term contracts with miners, some of them still have to buy spot cargoes as term supplies cannot always arrive in time and some low-CV grades need to be blended with high-CV cargoes sold in the spot market.
In addition, small power plants and industrial non-power users, which didn’t sign term contracts with mines, have to source from the spot market.
Prevailing offers for 5,500 Kcal/kg NAR thermal coal were around 1,250 yuan/t FOB with VAT at northern ports, traders told Sxcoal on November 24, almost unchanged from a day earlier, and 5,000 Kcal/kg NAR coal was mainly offered at 1,080-1,100 yuan/t.
Coupled with rises at some mines recently, traders reported thin profits from fresh cargoes, which also support the price to go up further, said a Jiangsu-based trader. The trader this week bought some 0.6-0.8% sulfur 5,000 Kcal/kg NAR coal from Shanxi and offered them at 1,100 yuan/t, a level that could barely make ends meet, he said.
Some Shaanxi-based 5,500 Kcal/kg NAR cargoes were traded at 1,200-1,250 yuan/t FOB with VAT, said a Shanxi-based trader. “We have raised our offers by a few dozens of yuan because of increased cost,” he added. The trader offered 5,000 Kcal/kg NAR thermal coal at 1,080 yuan/t for its 0.8%-sulfur coal.
Most traders seemed prudent of making big hikes in the near term, given the uncertainty of government policies. “Large price increases may attract the attention of the government,” the Shanxi-based trader said.
It is still uncertain whether the government would issue new price caps to tame the market.
This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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