As the economic sanctions on Russia go on, the request for Russian PCI coal substitution continues fermenting. Stronger inquiries have significantly pulled up PCI coal export prices at eastern ports in China’s Shandong province, leading to a significant expansion of export arbitrage.
While domestic supplies remain in squeeze, will high arbitrage boost more outflows from China?
An offer of 40,000-tonne PCI coal (VM 11%) was placed at $395/t, FOB Rizhao port in Shandong for March laycan.
The offer was much higher compared with Fenwei’s assessment for Jincheng PCI coal (VM 10%) at 2,185 yuan/t for domestic trade, ex-stock Rizhao with VAT, but still well below the global offers, Sxcoal learned.
Sxcoal heard a trade of 40,000-tonne Australian South Walker Creek low-vol PCI coal was settled at $645/t late last week, FOB Australia, with mid-April laycan.
More decent profit for export compared with domestic orders, coupled with higher price competitiveness with global settlement levels, has prompted some traders to shift part of their attention to the ex-China demand.
China’s PCI coal exports in March are likely to grow, but the increment may not be substantial.
The country is more preferred to export value-added products than raw materials nowadays. Coal exports from China had been below 10 million tonnes for the past 10 years, and the allocation for exports is continuing shrinking to meet growing domestic demand.
With the overall domestic coal output prone to fall short of demand, exports are expected to be limited further.
China exported a total of 2.6 million tonnes of coal in 2021, down 18.4% from a year ago. Exports in 2020 stood at 3.19 million tonnes, slumping 47.1% from a year earlier, according to data released by the General Administration of China.
Besides, only several major companies, including Shenhua, China Coal Energy, Shanxi Coal Import & Export, Aluminum Corporation of China and China Minmetals, are certificated for coal exports.
In the domestic market, PCI coal prices are gaining strength from growing purchases by the downstream steelmakers amid the expectation of concentrated production resumption after March 10.
A tender for anthracitic PCI coal issued by a leading steel mill in Tangshan of Hebei at 1,760 yuan/t, delivered basis with VAT, up by 15 yuan/t week on week.
Offers from Jincheng-based miners in Shanxi gained 50 yuan/t to around 1,660 yuan/t, ex-washplant with VAT and PCI coal was offered in Henan at 1,800 yuan/t, ex-washplant with VAT, Sxcoal learned.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.
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