Spot thermal coal prices continued to fall at northern China ports in the midweek, due to persistently sluggish demand from end users. High stockpiles at ports also compelled traders to accelerate sales.

 

Spot prices now have dropped close to levels in late September and early October just before the National Day holiday, Sxcoal data showed.

 

On October 25, the benchmark 5,500 Kcal/kg NAR thermal coal was mainly offered at 995-1,010 yuan/t FOB with VAT at northern ports, down from 1,000-1,020 yuan/t a day earlier; offers of 5,000 Kcal/kg grade generally stood at 870-890 yuan/t, compared with 880-900 yuan/t in the previous day, while 4,500 Kcal/kg NAR grade was offered stable 740-750 yuan/t.

 

Most utilities balked at spot purchases to avert high prices, which they expected to fall further in the near term. For many power plants, buying spot coal at a cost of 1,000 yuan/t, basis 5,500 Kcal/kg NAR, would render them profitless, one insider pointed out.

 

The 5,000 Kcal/kg and 4,500 Kcal/kg NAR grades witnessed more aggressive bids than the 5,500 Kcal/kg NAR coal, which, some traders said, is still supported by limited availability.

 

A Qinhuangdao-based trader said he had already sold out all 5,500 Kcal/kg NAR grades while other traders had a similar situation. For the remaining cargoes of 5,000 Kcal/kg and 4,500 Kcal/kg NAR, the trader offered a premium of 2 yuan/t to corresponding CCI indexes.

 

A Fujian-based trader reported some bids of 860-870 yuan/t for 5,000 Kcal/kg NAR coal. The trader planned to make no deals as the prices didn't align with his expectations. "Those want to sell set their selling prices at 870-890 yuan/t (for this grade)," he said.

 

A deal was reportedly done at 733 yuan/t for cargoes of 4,500 Kcal/kg NAR coal, he added.

 

According to a Guangdong-based utility source, the buying activity remained in a deadlock. "Both utilities and industrial plants are not in a rush to buy at present," he noted.

 

Cargoes of 5,000 Kcal/kg with 1% sulfur were quoted at 875 yuan/t, while 5,500 Kcal/kg NAR was offered a little higher than 1,000 yuan/t, both by a large trading house affiliated to a large state-owned mining group, said the source.

 

"Now, power plants in South China are not experiencing any supply shortages," he said. "Buyers and sellers are still in price wrestling. Traders at ports along Yangtze Rivers are deterred from buying if without making contracts with end users." There was a negotiable space of 10-15 yuan/t for 4,500 and 5,000 Kcal/kg NAR cargoes, he disclosed.

 

Coal stockpiles at power plants in coastal provinces are currently abundant for around 20 days of use, in spite of an average level of 13 days at those in Zhejiang.

 

Coal stocks have rebounded at Qinhuangdao port after Daqin railway returned to normal transport. As of October 24, its stocks stood at 5.45 million tonnes, up from 4.95 million tonnes a week ago. Meanwhile, Caofeidian's stocks continued to rise, reaching 12.85 million tonnes on the same day, compared with 11.79 million tonnes a week earlier.

 

The fast increase in portside stocks has dampened traders' sentiment. Some traders are ready to sell at lower prices. With recent declines in mine-mouth prices, the downward trend may persist in the remaining days of the month.

 

The country's leading coal mining group cut its third-party coal purchase prices again at Batuta rail station, with 5,500 Kcal/kg NAR coal down 17 yuan/t to 807 yuan/t, free-on-rail with VAT, effective October 24.

 

Policy boosts longer-term sentiment

The issuance of 1 trillion yuan ($137 billion) of special treasury bonds rippled through the coal market. Traders believed the funds, which are raised to support the rebuilding of disaster-hit areas and the improvement of urban drainage prevention infrastructure, are expected to boost industrial activity and eventually coal usage.

 

This, coupled with the upcoming winter heating season, is expected to boost coal demand next month, said the Guangdong-based utility source.

 

On October 25, the CCI index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed by Sxcoal at 1,002 yuan/t FOB with VAT, down 3 yuan/t from a week ago; 5,000 Kcal/kg NAR coal assessment was at 877 yuan/t, down 3 yuan/t, and that for 4,500 Kcal/kg NAR at 737 yuan/t, a 3 yuan/t fall as well.