China's spot thermal coal prices increased at the beginning of this week as restocking demand extended from the previous week to prepare for the Chinese Lunar New Year holiday, but people were still uncertain if the price increase could be sustained.
On January 9, the benchmark 5,500 Kcal/kg NAR thermal coal was offered at 1,200-1,225 yuan/t FOB with VAT, up from around 1,200 yuan/t late last week. Prevailing offers for 5,000 Kcal/kg NAR coal were almost unchanged at around 1,050-1,060 yuan/t.
Shanxi coal, however, enjoyed a 10-20 yuan/t premium because of higher quality. A Guangdong-based trader reported Shanxi 5,000 Kcal/kg NAR cargoes were generally offered at 1,070-1,080 yuan/t. He learned a deal done at 1,070 yuan/t during the weekends.
A Guangdong-based trader reported an offer for a 0.7%-sulfur cargo of this grade at 1,080 yuan/t. "Traders have raised their prices today to 1,100 yuan/t in the market; many of them have very limited cargoes in hand."
A Beijing-based trader said two cargoes of Shanxi 5,000 Kcal/kg NAR coal, with sulfur below 0.8%, were traded at 1,085 yuan/t FOB at Caofeidian port during the weekends.
For Shaanxi coal, 5,500 Kcal/kg NAR cargoes were offered at 1,220-1,240 yuan/t, according to a Shanghai-based trader. "Shaanxi high-CV cargoes have ultra-low ash, and are mainly supplied to chemical factories. Few power plants can afford the price."
A Hebei-based trader heard an offer for Shaanxi 5,500 Kcal/kg NAR with 0.4% sulfur at 1,250 yuan/t in the morning. He expected the prices to increase further this week.
The price rise at northern ports was supported by a rally at production areas, as more mines announced the holiday leave this week, signaling further drop of production in the following weeks. This prompted local utilities and industrial factories to ramp up restocking.
At least 16 coal mines announced to halt operations on January 9 and 10 in Shaanxi province.
On January 6, the state coal mining group CHN Energy raised its purchasing prices by 40 yuan/t for thermal coal from mines in Inner Mongolia, for delivery in the period of January 7-29, on a free-on-rail basis with VAT at Batuta rail station.
Downward pressure in crescendo
Despite a price rise since early last week, traders still felt the downward pressure. Coal consumption was far lower than the year-ago level amid the benign weather and the epidemic.
As of January 9, coal consumption at the six coastal power groups were only 807,400 tonnes, compared with 857,200 tonnes on the same day last year; their stockpiles combined were enough for 14.6 days of use, against 13 days a year ago.
Also, coal supply is abundant with more than 1.2 million tonnes of coal shipped to northern ports each day via Daqin railway. Coal stockpiles stood at 5.45 million tonnes at Qinhuangdao port on January 9, much higher than 4.4 million tonnes on the same day in 2022.
Traders expected the demand to be short-lived and the market is likely to reenter the downward track, as the Lunar New Year approaches.
Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.