China's PCI coal market remained weak in November, as sidelined sentiment dominated the whole market.

Steel mills were inactive in buying PCI coal market in the month as consumption of steel products entered into a slack season and prices were still under pressure, denting steel production. With falling coke prices, steelmakers also looked to press down PCI coal buy prices.

October supply-demand

The effective supply of anthracite and meager coal for PCI purposes reached 7.78 million tonnes in October, down 8% compared with a month earlier.

Total effective PCI coal supply witnessed a year-on-year decrease of 9.3% in January-October, reaching 73.55 million tonnes, of which anthracite and meager coal output stood at 69.69 million tonnes, down 8.4% year on year.

PCI coal demand rebounded 5.9% month on month to 7.53 million tonnes in October. This contributed to a cumulative demand of 76.01million tonnes in the first ten months, a 3.7% fall from a year ago.

In summary, the supply of PCI coal in October was 250,000 tonnes higher than the demand.

Market overview in November

Key Producing Areas

By the end of November, PCI coal prices in the four key producing cities - Yangquan and Lucheng in Shanxi province, and Yongcheng and Jiaozuo in Henan province - all experienced decreases compared to the previous month, up by 66 yuan/t, 60 yuan/t, 71 yuan/t and 69 yuan/t respectively.

On a yearly basis, PCI coal prices in these four major producing areas decreased by 296 yuan/t, 270 yuan/t, 319 yuan/t and 310 yuan/t, respectively.

On November 26, the Fenwei CCI Met index for Yangquan PCI coal with 12% ash, 10% VM and 0.8% sulfur was assessed at 1,129 yuan/t, free-on-rail basis with VAT, down 66 yuan/t from a month ago. In Shanxi's Changzhi, Fenwei assessed PCI coal (S 0.5%, A 12% and VM 12%) at 1,030 yuan/t, falling 60 yuan/t from the previous month.

In northwestern China's Ningxia, the ex-washplant price of Shizuishan PCI coal with 7,000 Kcal/kg NAR, 0.7% sulfur, 12% ash and 12% VM was at 1,440 yuan/t, flat from the preceding month. In Hancheng of Shaanxi, the free-on-rail price of PCI coal (CV 6,000 Kcal/kg NAR, S 0.5%, A 11% and VM 18%) stood at 1,020 yuan/t, down 60 yuan/t from October.

Key Consuming Areas

In November, bullish sentiment dominished significantly in steel industry as the strength of economic stimulus fell short of expectation. This, combined with cooling weather, restrained steel demand. The relatively weak winter restocking demand also crippled supports to steel product prices.

With declined profits and other factors like environmental protection, some blast furnaces stopped operations for maintenance.

On November 26, prices of Tangshan square billet (Q235) fell 70 yuan/t to 3,090 yuan/t; Shanghai steel rebar (HRB 400, 20mm) decreased 100 yuan/t to 3,440 yuan/t; and Shanghai hot-rolled plate (Q235, 3mm) dropped 90 yuan/t to 3,550 yuan/t.

Forecast

PCI coal prices in November kept weakening due to stronger sidelined sentiment. In December, steelmakers' demand for PCI coal is unlikely to be boosted during the slack season. But the major political event in December and winter procurement could provide a silver lining to the PCI coal market.