Chinese utilities and traders are tentatively returning to the domestic thermal coal market as prices have dropped to the lowest since mid-February after falling for nearly one month.

On April 14, buyers were actively looking to purchase cheaper cargoes at Qinhuangdao and other northern ports, with many trades observed by market sources. The purchases still focused on 5,000 Kcal/kg NAR grade.

A private cement producer purchased a 5,000 Kcal/kg NAR cargo at 885 yuan/t FOB with VAT, and some traders reported that they sold cargoes of this grade at 886-890 yuan/t in the past two days.

Some buyers managed to procure at 750 yuan/t for some 4,500 Kcal/kg NAR coal, much lower than the market average offer price of 770 yuan/t.

Tempted by the lowest prices in two months, some traders made purchases to ramp up stocks for delivery earlier contracts with utilities. The market witnessed some minor hikes in offer prices as a result, by 5-10 yuan/t from a day earlier, but the overall prices remained unchanged.    

The quotation for 5,000 Kcal/kg NAR coal remained at around 880 yuan/t FOB, and that for 4,500 Kcal/kg NAR was around 770 yuan/t. Cargoes of 5,500 Kcal/kg NAR coal were mainly offered at 1,010 yuan/t, but few bids and trades were observed.

It is worth noting that coal stockpiles at Qinhuangdao port are falling rapidly this week, down from the recent high of 6.7 million tonnes on April 6 to 5.9 million tonnes on April 13, due to a combination of Daqin's maintenance and recent growing demand.

The long-term outlook is still uncertain, in part subject to price adjustments by the country's top miner CHN Energy, which has recently cut its purchase prices for coal from other mines.

Therefore, some sellers decided to pre-sell their monthly volumes at a relatively lower rate, such as a quote of Shanxi 5,000 Kcal/kg NAR coal with 1.5% sulfur at 860 yuan/t FOB.

To compete with China's domestic coal, the prices of Australian 5,500 Kcal/kg NAR coal have dropped by 60 yuan/t this week to 1,100 yuan/t, ex-stock with VAT at southern China ports. Some traders considered the domestic price cannot stay stable for long due to competitive imported prices.

On April 14, 5,500 Kcal/kg NAR thermal coal traded at Qinhuangdao port was assessed at 1,010 yuan/t FOB with VAT, flat day on day. The 5,000 Kcal/kg NAR grade was at 875 yuan/t, up 4 yuan/t from a day ago, while the 4,500 Kcal/kg NAR grade was at 765 yuan/t, a 5 yuan/t rise.

Indonesian prices unchanged

Indonesian thermal coal prices were broadly flat on April 14 as demand from China and India was quite moderate.

Cargoes of 3,800 Kcal/kg NAR coal were mainly offered at $72-73/t FOB for May delivery on Panamax vessels. Offer/bid activity remained stagnant for mid- and high-CV cargoes.

Supply of May-loading cargoes was abundantly available in the market due to the slowdown of purchases from China and India. However, a Chinese trader said the prices could be difficult to fall as the summer peak demand is approaching.

Indian buyers said they were not willing to buy at current prices, hoping to take positions at a lower level in the near term.

Russian high-CV cargoes dipped this week, with a Chinese trader receiving an offer of $121/ FOB for 5,500 Kcal/kg NAR coal, translating to 970 yuan/t CFR with VAT.

"Russian coal is now in shortage and less cost-effective than Indonesian coal," the trader said.

On April 14, Fenwei assessed Indonesian 3,800 Kcal/kg NAR thermal coal at $81.5/t CFR South China, flat from a day ago; on a FOB basis, this grade was assessed at $72/t, also unchanged.

Indonesian 4,700 Kcal/kg NAR thermal coal were assessed at $104.5/t CFR, flat from a day before, and the FOB price for this grade was assessed stable as well at $97.0/t.