China's domestic thermal coal prices posted big declines at the beginning of this week, due to a combination of weak demand and sufficient supply, curtailing the outlook for potentially strong restocking later this month.

On April 10, benchmark 5,500 Kcal/kg NAR thermal coal was offered around 1,030 yuan/t FOB with VAT at northern transfer ports, down from 1,050-1,060 yuan/t on April 7. This quickened the recent decline that started from 1,138 yuan/t on March 15 as assessed by Sxcoal.

Offer prices for 5,000 Kcal/kg NAR fell to 900-910 yuan/t FOB, following deals done at 895 yuan/t via utility tenders late last week, while 4,500 Kcal/kg NAR coal was offered at 790-800 yuan/t.

"Unlike price falling moderately on a daily basis last week, today's fall has sparked concerns over a faster decline in the near run," said a Shanxi-based trader.

The trader acknowledged thicker bearishness among insiders, with many traders looking to dump their inventories.

"The market is still on the decline, with 5,000 Kcal/kg NAR already traded at 895 yuan/t," said a Qinhuangdao-based trader. "Utilities are less counted on to lead a round of buying because they have steady long-term contract supply."

"Many people are afraid that there won't be a pre-summer restocking boom," he said, adding that traders tended to blend some imported coal to reduce the overall cost.

There were still some traders refusing to lower prices owing to heavy losses. "Cutting prices down cannot make a big difference and they simply refuse to do so in hoping for a price recovery in the future."

Some others tried to sell their coal directly to large mining groups at rail stations instead of sending to ports.

Coal shipments via Daqin line have fallen to 1 million tonnes since the maintenance started on April 6, showed data obtained by Sxcoal. Normally, the line's daily transport ranges in 1.2-1.3 million tonnes.

However, the impact was eclipsed by a slump in outflows of the three northern ports (Qinhuangdao, Caofeidian and Jingtang), with the weekly average down to 1.2 million tonnes in the week ending April 7, compared with 1.4 million tonnes a week earlier. Accordingly coal stockpiles climbed further to 26.3 million tonnes as of April 7, compared with 25.15 million tonnes a week ago, marking a 4.57% rise on the week.

Sources disclosed CHN Energy, or Shenhua, cut its purchase prices down to 829.5 yuan/t for 5,500 Kcal/kg NAR coal that it buys from other sources on a free-on-rail basis in Inner Mongolia from April 8 until April 11, instead of the previous 902 yuan/t over April 4-11.

The sudden price correction fueled the bearish sentiment in the spot market, further weakening the cost support to current prices at northern ports.

On April 10, 5,500 Kcal/kg NAR thermal coal traded at Qinhuangdao port was assessed at 1,043 yuan/t FOB with VAT, down 12 yuan/t from late last week. The 5,000 Kcal/kg NAR grade was at 894 yuan/t, down 25 yuan/t, while the 4,500 Kcal/kg NAR grade was at 785 yuan/t, 17 yuan/t off from late last week.

Indonesian thermal coal prices under further downside pressure

Indonesian thermal coal prices have been falling only mildly in recent weeks, as solid tender invitations by Chinese utilities partly offset thin liquidity in the spot market. However, the decline may intensify as Chinese utilities wanted lower prices to match falling domestic prices.

Currently, it is common to see utilities awarded Panamax 3,800 Kcal/kg NAR below 640 yuan/t DDP with VAT, netting back to $74/t FOB Kalimantan. A Shanxi-based trader expected the awarded prices to fall to near 620 yuan/t this week.

A Fujian-based utility awarded a 3,800 Kcal/kg NAR cargo at 637 yuan/t late last week, a local trader noted, who expected the awarded prices down to 630-640 yuan/t.

For 4,500 Kcal/kg NAR coal, the trader noted the prices were almost on par with that of domestic comparable coal.

A fatal accident happened at a coal mine under KIDECO in the weekends, resulting in suspensions of production and logistics at the mine from April 8 until April 18, market sources noted.

Sources estimated limited impact it has on the overall supply as the mine focuses on long-term contract supply, with only seven or eight vessels released to the spot market each month.

On April 10, Fenwei assessed Indonesian 3,800 Kcal/kg NAR thermal coal at $83.0/t CFR South China, down $1.0/t from April 7; on a FOB basis, this grade was assessed at $72.5/t, also off $1/t.

Indonesian 4,700 Kcal/kg NAR thermal coal were assessed at $109.5/t CFR, dropping $1/t from late last week, and the FOB price for this grade was assessed at $101.0/t, down $1/t as well.