Weakness has continued to dominate in China's thermal coal market despite an expected upward bias towards late March, market sources told Platts this week.
With coal stocks remaining high at both Chinese power plants and coal ports, a Beijing-based trader said the Chinese coal market was likely to remain slack for the next couple of weeks. Coal stocks at China's key power plants totaled 74.45 million mt on February 20, able to last for about 20 days of burning, according to figures from the National Development and Reform Commission.
However, the recent drops in coal stocks at coastal ports, together with the month-long overhaul of the Datong-Qinhuangdao railroad rumored to be starting in mid-March, may end the weakness in China's coal market, market sources said.
Fangcheng Port in southern China's Guangxi Zhuang Autonomous Region is reported to be holding slightly over 6 million mt of coal and incoming coal vessels have to wait for about a week before they can be unloaded. Stocks at Fangcheng Port were once reported at about 6.8 million mt in mid-January.
"Not only Fangcheng Port, other major coal ports also see their stockyards packed," a Shandong-based trader said. Indeed, coal stocks at Guangzhou Port in southern China's Guangdong Province held 2.85 million mt of coal on Monday, down from a record high of 3.65 million mt on February 9. Qinhuangdao Port held 8.18 million mt of coal on Monday, down slightly from 8.34 million mt on February 22, but sizably up from 6.36 million mt on January 1.
Meanwhile, 5,500 kcal/kg Australian coal NAR is offered into the Chinese market at $107-108/mt CFR or $94-95/mt FOB for early Q2 deliveries, similar to a week ago. But a Shandong-based trader noted that CFR prices of such material will have to drop to $101-102/mt for a deal to be done. This is because purchase prices of local power plants have been about Yuan 760/mt ($120.6/mt, including 17% VAT, delivered to appointed river ports) for 5,500 kcal/kg domestic thermal coal. This purchase prices will translate into a CFR price of $103/mt for similar imported coal.
Two mini-Capesize vessels of 4,700 kcal/kg Australian thermal coal NAR is reported to have been sold to a Chinese trader at $69/mt FOB or $81-82/mt CFR for Q3 deliveries. A Beijing-based trader said that price sounded acceptable to Chinese consumers.
For early Q2 deliveries, 6,000 kcal/kg South African thermal coal NAR is offered into the Chinese market at $104-105/mt FOB, or $118-119/mt CFR, but few deals have been reported. For deliveries in late Q2 when Chinese thermal coal demand is expected to pick up in preparation for the summer peak season of electricity consumption, it is offered as high as $123/mt CFR but again has met little interest from Chinese traders.
Indonesian thermal coal is offered into the Chinese market at relatively lower prices: 4,700 kcal/kg Indonesian thermal coal NAR is offered at $68-89/mt FOB, or $76-77/mt CFR, for March-April deliveries; and 3,700 kcal/kg Indonesian thermal coal NAR is offered at $50-51/mt FOB, or $58-59/mt CFR, for March-April deliveries.
Current Indonesian coal prices are acceptable to downstream consumers who are delaying their purchases in the hope of a further drop in prices, a Fujian-based trader said.
For comparison, the weekly reference FOB price of 5,500 kcal/kg thermal coal NAR was reported by Qinhuangdao Port at Yuan 760-770/mt ($120.6-122.2/mt, or $103.1-104.4/mt without 17% VAT) Wednesday, down Yuan 5 from February 22. The prices are lower than the price cap of Yuan 800/mt FOB (including 17% VAT) set by the central government for 5,500 kcal/kg spot thermal coal NAR at northern Chinese ports.
Source: Platts
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