China's portside thermal coal prices had trended lower since mid-March on overall weak fundamentals, but a recent rebound reflects improving market conditions.

Qinhuangdao 5,500 kcal/kg coal prices have climbed to above 1,020 yuan/t ($148.5/t) FOB with VAT, up roughly 25 yuan/t from the recent low. Prices for 5,000 kcal/kg and 4,500 kcal/kg NAR coals also increased to 900 yuan/t and 785 yuan/t, respectively.

The upticks, started from late last week following one and a half month's decline, have been supported by multiple positive changes, though many participants deemed it as sentiment-driven and less likely to last long.

Market sentiment turned to be cautiously positive after prices falling to some 1,010 yuan/t FOB or lower for 5,500 Kcal/kg NAR coal traded at Qinhuangdao port, a level last seen in mid-February after Chinese New Year holidays. That was already 145 yuan/t below the government-set price cap of 1,155 yuan/t for spot coal trades announced early last year.

The positive sentiment was also encouraged by improved coal consumption at coastal power plants as the economy continues to recover. The latest data showed daily coal burns at coastal power plants under the six power groups increased to some 724,700 tonnes, up 2.78% from a two-month-plus low in the week prior.

But, several sources have indicated a lack of strong upward strength in power generation, in the short run at least, with some coastal plants running at only 60% capacity. Slow industrial recovery has been the main drag, they noted, despite a 6.5% year-on-year growth in power consumption of the industrial sectors in March as per official statistics.

Data from the China Electricity Council seems to confirm such claims, as its member companies, occupying 67% of China's total installed coal power capacity, reported a 4.5% week-on-week decline in daily coal burns over the week ending April 13, yet a 12.3% growth year on year.

Meanwhile, weather conditions are potentially having rather varied effect on the northern and southern regions of the country, and participants said further observations are needed while foreseeing limited impact.  

The country's northern and central provinces are expected to experience a new round of cold air in the next few days, with temperatures dropping 20 degrees Celsius and even close to 30 degrees Celsius in some areas.

Yet, heavy rains are also forecast to hit southeastern Guangdong and Fujian provinces, as well as western Sichuan, continuing to constrain power demand for air-conditioning purpose.

It is noted that lower water levels and less rainfalls have impacted hydropower generation in hydro-rich southwestern provinces, notably Yunnan, which contributes 1/4 of the country's hydropower output. This, however, is a sure support for coal-fired generation and the demand for coal as a result.

Coal inventories have declined at northern ports, as the month-long maintenance to coal-dedicated Daqin railway curbed coal arrivals while outbound shipments moved upward.

The three northern ports of Qinhuangdao, Caofeidian and Jingtang held 24.6 million tonnes of coal in stock on April 19, down 5.1% week on week. That, however, was still 45.6% higher than the year-ago level.

Participants generally contributed the stock decline to steady shipment of long-term contracts, as only a few power plants made purchases to take advantage of the current low prices in the spot market.

The pop-up of spot purchases also followed reduced price edge of imported coal, which has stayed relatively stable in recent days, but recent spikes in domestic market apparently are widening the spread once again.

On April 19, the CCI index for Indonesian 3,800 Kcal/kg NAR coal was assessed at $72/t FOB East Kalimantan and $81.5 CFR south China, still unchanged from the previous week, while Indonesian 4,700 Kcal/kg NAR coal was assessed also steady at $97/t FOB East Kalimantan and $104.5/t CFR south China.

Calculation shows the spread of Indonesian 3,800 Kcal/kg NAR coal with Chinese domestic equivalent increased to 74 yuan/t from 57 yuan/t a week earlier on CFR south China basis, while that of Indonesian 4,700 Kcal/kg NAR coal at 41.8 yuan/t, down 2.3 yuan/t week on week.