China's thermal coal prices are likely to be range-bound in December amid the increase in seasonal purchases and sentimental factors, and may not find enough support for a significant price surge.

 

This has been the view shared by some participants regarding the direction of Chinese domestic thermal coal market in December.

 

Raw coal production in China usually increases in December as demand grows in the winter heating season, but this year coal output is likely to be impacted by escalated safety inspections, they noted.

 

As temperature falls in northern China, coal mines are expected to see more demand from nearby end users. This would impact port-bound coal deliveries, accelerating destocking at northern ports.

 

Firm imported thermal coal prices would also support portside traders to uphold prices, given the losses they face in bringing coal from production areas.

 

But, elevated coal stocks at downstream plants and off-peak production in non-power industry such as cement and chemical plants would continue to limit the demand for thermal coal, they said.

 

There also are some participants anticipated a decline in coal prices in December, citing relatively warmer temperature, slowed economic growth, as well as relatively ample supply under the government's supply guarantee requirement.  

 

Coal stocks at Bohai-rim ports have continued to decline, but outflows are sometimes interrupted by port closures and other reasons.

 

Power plants also witnessed slow coal consumption. Data showed, daily coal burns at coastal provinces rose to above 1.9 million tonnes, the combined coal inventory was still around 35 million tonnes, an increase of 4 million tonnes from a year ago.

 

A few participants also heightened the chance of higher prices as they expected the peak demand to emerge in December.

 

However, coal price jumps are quite sensitive in a time when the signing work of long-term contracts in 2024 is undergoing.

 

The occurrence of extreme weather like strong cold waves and snowstorms would lead to the surge in inquiries and raises the likelihood of sentiment-driven price increases, they said.