Participants in China’s coal market are divided on where spot prices of domestically-produced thermal coal are headed. With winter now over and summer still months away, the country’s electricity generators have entered an “off-season” when demand for power for heating has waned, reducing their need for coal. And yet the lingering supply tightness of thermal coal has kept prices at a high level, Mysteel Global notes.
As of April 28, Mysteel’s assessed price for 5,500 kcal/kg Shanxi blend spot thermal coal had slid by Yuan 10/tonne ($1.5/t) on week to Yuan 800/t in Qinhuangdao port in North China’s Hebei province. However, despite the on-week dip the price was still Yuan 99/t higher on month or Yuan 326/t on year. Last week’s was also the highest that the price for this grade of coal has reached in the same period since 2011, and far above the ‘warning’ line of Yuan 600/t nominated for thermal coal by China’s central authorities, Mysteel Global noted.
“The market has lost direction,” said a source with a power plant in Hebei candidly. “The price negotiations between long- and short-position holders are stalemated.”
With the month-end quickly approaching, many coal miners in North China’s Inner Mongolia have recently encountered problems with the tight issuance of bills for coal transportation. At the same time, the inspections carried out on mines in Northwest China’s Shaanxi and North China’s Shanxi to examine safety and environmental protection procedures have also affected local thermal coal production, he explained.
The mentioned three regions are China’s top three coal mining areas accounting for over 70% of the country’s output of raw coal for all uses.
Domestic electricity plants have shown resistance to paying high prices for local coal, and some also reduced procurement recently because of the downturn in consumption, according to a Shanghai-based market watcher.
Meanwhile, as the maintenance on the Datong-Qinhuangdao railway line is close to ending, coal transportation to ports on the Bohai Sea in North China is anticipated to recover, he added. Datong-Qinhuangdao is China’s largest dedicated railway for coal transportation, connecting core coal mining regions with Bohai ports. Bohai is also the core area for coal trans-shipment to East and South China, Mysteel Global notes. As reported, the line is under scheduled maintenance lasting 3-5 hours/day over April 6-30.
On April 28, total thermal coal stocks at Qinhuangdao were at 4.3 million tonnes, down by 10% on month or by 27% on year, according to Mysteel’s data.
Nevertheless, coal-users may return to the market soon to replenish stocks, a Shanghai-based futures analyst suggested. Although the heat of summer remains at least another month away, electricity providers will have to start building up coal stocks to meet the spike in power demand, he explained.
Source: Sean Xie & Russ McCulloch
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