China domestic coal prices continued to weaken last week, still pressured by the raft of measures unleashed by the government to boost supply and lower prices. But they remain well above levels the authorities are believed to deem comfortable for both miners and power utilities: 530-580 yuan per tonne (between $82 and $91 per tonne).
Yesterday, the State Grid Corporation of China said that the supply and demand of power in areas operated by the company (88% of Chinese territory) have returned to normal, thanks to the rebound in coal stocks. The scale of power curbs and the electricity gap have been significantly reduced, it said, adding that, as of Saturday, the power supply to some factories with high energy consumption and high pollution in certain provinces was still being limited. The grid will face an “overall tight balance of power with gaps in partial areas” this winter and coming spring.
December 2021 prices on the China Zhengzhou Commodity Exchange closed at $164.770/t on Friday, down by 1.3% week-on-week.
European coal prices were also down on the spot and the month-ahead. By contrast, far curve prices were more resilient, supported by technical buying, and the backwardation was reduced.
API2 Cal 2022 prices closed at $107.63/t on Friday, up by $6.13 week-on-week.
China coal prices are torn between the authorities’ desire to push them lower (as they are still above the supposed official preferred zone) and a fundamental situation which, although clearly improving, is still fragile. Therefore, they could stabilize in the very short term. As for API2 Cal 2022 prices, the continuation of the technical rebound could lend them small support.