Thermal coal prices faced downside pressure in northern China's major production areas, as a leading miner's cut on its buy prices for third-party coal added uncertainty to the market even as the overall production reduced.

 

The country's biggest coal miner reduced its purchase prices for third-party coal in Inner Mongolia by 5-10 yuan/t to 750 yuan/t for 5,500 Kcal/kg, 619 yuan/t for 5,000 Kcal/kg and 517 yuan/t for 4,500 Kcal/kg NAR coal from late November 30, on a free-on-rail basis with VAT, sources disclosed.

 

The price adjustment, taken by participants as a reference to the spot market direction in the days ahead, signals continued prudence for the near-term demand, despite reduced supply from miners.

 

Thermal coal production has retreated moderately in China's major production areas, as a few mines cut or halted production amid stringent safety inspections while some presented abated enthusiasm with nearly-finished annual production goals.

 

Sxcoal's survey showed capacity utilization at 100 thermal coal mines fell 0.57 percentage point week on week to 87.3% during the week ended on November 29. Miners found themselves still lacking bargaining power as demand remained subdued.

 

While some downstream users maintained purchases to meet rigid demand, traders shifted to a cautious stance with lukewarm enthusiasm for long-distance coal hauling.

 

Some miners in Shaanxi and Inner Mongolia reported slightly accumulated stocks with reduced trucks coming for loading, and had to cut prices further to entice buying interests.

 

One Yulin-based miner in Shaanxi sold slack coal (CV 5,650 Kcal, S 0.6%) at 795 yuan/t and small lump coal (CV 6,200 Kcal) at 895 yuan/t on November 30, down by 15 yuan/t and 55 yuan/t compared with the previous settlements.

 

On December 1, a 20 yuan/t reduction for 5,200 Kcal/kg NAR coal was heard at an Ordos-based mine in Inner Mongolia.

 

However, a few miners in northern Shanxi slightly raised prices to test the market following a moderate uptick of inquiries.

 

Of the 89 thermal coal mines contacted by Sxcoal on December 1, 10 cut prices averagely by 30.6 yuan/t, 7 raised prices by 18 yuan/t on average, and 72 maintained prices unchanged.

 

Stalemate at portside market

Inquiries marginally picked up at northern transfer ports on December 1, driven by rising coal burns and falling inventories at power plants. However, trading activities remained subdued amid division in price expectations.

 

Thermal coal stocks held by major coastal power plants stood at 14.42 million tonnes on December 1, down 216,000 tonnes week on week, while their coal burns rebounded by 11,000 tonnes to 811,000 tonnes on the day. The overall stocks at these plants could sustain 18 days' worth of usage, still at a high level.

 

Traders were unwilling to lower offer prices aggressively due to high costs, while downstream users still actively sought price reductions, sources noted.

 

Participants expected the port-side market to be temporarily range-bound given the weakness in both supply and demand sides.

 

However, sources said the top miner's hike of selling prices at northern port could potentially bring some positive influence to the market.

 

The major adjusted up its selling prices for self-produced or third-party thermal coal by 5 yuan/t at Huanghua port on December 1, sources said.