China's imported Mongolian coking coal market has been on the decline in December at Ganqimaodu border port, as end-users continue to show sluggish demand amid bearish sentiment.

Mongolian 5# raw coal and 3# washed coal experienced rather faster decreases than China's domestic grades, dropping below 1,000 yuan/t and 1,100 yuan/t.

On December 19, the CCI index for Mongolian 5# raw coal stood at 945 yuan/t, ex-stock Ganqimaodu with VAT, down 20 yuan/t day on day, while that for Mongolian 3# washed coal reached 1,060 yuan/t, also a 20 yuan/t drop.

Their prices also recorded a 335 yuan/t decline and a 390 yuan/t fall from October 9, respectively, while the CCI index of Wuhai fat coal (S 1.8%, A 10%, GRI 90) slid 110 yuan/t.

Cooling macroeconomic expectations after the National Day holiday dampened ferrous futures markets and participants' confidence. Meanwhile, spot steel prices extended the downtrend amid weak demand, forcing steelmakers to seek profits from upstream producers.

This weighed down coking coal and coke prices in China's production areas, with the CCI assessments for Shanxi low-sulfur primary coking coal and Luliang Quasi Grade I Met coke at 1,518 yuan/t, ex-washplant with VAT, and 1,510 yuan/t, ex-plant with VAT, as of December 19, respectively, down 275 yuan/t and 150 yuan/t compared to October 9.

Meanwhile, surplus supply led by high domestic production and imports of coking coal further pressed prices.

During January-November, China imported 52.57 million tonnes of coking coal from top supplier Mongolia, up 10.88% year on year. Surging imports and limited demand growth caused rapidly piling stocks at supervision warehouses of Ganqimaodu, with the inventory surpassing 4.5 million tonnes at the beginning of December.

Against this backdrop, port authorities started to restrict Mongolian coal truck clearances to alleviate inventory pressure, leaving truck inflow gradually down below 500 in recent days.

Weakened spot offers of Mongolian coal also triggered an increase in e-auction failures in Mongolia. As of December 20, the trade of Mongolian 3# washed coal (S 0.85%, A 11%, GRI 75) on the Mongolian Stock Exchange failed for the 28th consecutive session since November 12.

Coal miner Energy Resources has reduced the starting price of Mongolian 3# washed coal to 1,000 yuan/t on December 6, DAP Ganqimaodu and exclusive of VAT, which was assessed by Sxcoal at around 1,200 yuan/t after including 3% import duty, 13% VAT and port charges.

The import cost, however, is notably higher than spot prices of 1,060 yuan/t at Ganqimaodu border port. Sxcoal calculated the average loss of selling imported Mongolian 3# washed coal at a range between 202 yuan/t and 342 yuan/t.

Meanwhile, Mongolian 5# raw coal prices have also dropped near the levels of long-term contracts by Erdenes Tavantolgoi JSC. Traders chose to actively liquidate cargoes and exited the market with a wait-and-see stance, considering severe losses and a pessimistic outlook for the near-term market.

The cost support appears to be limited amid a salient supply-demand contradiction. It remains to be seen whether import costs of term-contract raw coal from large miners will shore up the imported Mongolian coal market and supply-demand fundamentals will improve.