China's Spot Thermal Coal Prices Further Rise on Supply Crunch
Spot prices of thermal coal traded at northern China ports climbed further in recent days, mainly due to a supply crunch caused by decreased output at coal mines and slide of import coal arrivals.
Thermal coal prices went up sharply at northern transfer ports, especially 5,000 Kcal/kg NAR material, traders said.
Domestic 5,000 Kcal/kg NAR coal was offered above 590 yuan/t or even higher at 605 yuan/t FOB, compared with 585 yuan/t earlier last week, according to a trader in Qinhuangdao port.
Offer prices of 5,500 Kcal/kg NAR coal stayed roughly unchanged at 670-675 yuan/t FOB, he said.
"Utilities, who are mainly taking on term contract coal for stock-building, made very limited purchases from the spot market, mostly settled on price index," the trader said, without elaborating on the index against with deals are concluded.
He expected spot prices to continue to rise moderately in the short run, bolstered mainly by coal mines' output cut for safety concerns and decreased import coal arrivals amid China's import restriction.
A second trader in Qinhuangdao port said some cargoes of Shanxi 5,000 Kcal/kg NAR coal with 1% sulfur were settled at 582 yuan/t FOB last Friday, while the material is offered as high as 600 yuan/t FOB now.
"The material, mainly supplied to long-term clients, is also available for common buyers at a price 5 yuan/t higher," he said. "Only advance bookings are acceptable now, since no stocks are left at the port; new coal will arrive on December 5."
The Shanxi 5,500 Kcal/kg NAR coal with 0.8% sulfur was offered at 690 yuan/t FOB at Jingtang port, said a trader in central China.
"Utilities are actually open to spot coal if prices are acceptable, though they did show tepid interest in high-priced material," he noted.
An Inner Mongolia-based trader cited tight rail capacity for the rebound of coastal coal prices. "Some coal couldn't be transported to northern ports timely, as railway bureaus prioritized large enterprises in rail wagon allocation.
Offer price for Inner Mongolian 5,500 Kcal/kg NAR coal with 0.6% sulfur rose to 680 yuan/t FOB, while that for Shanxi 5,000 Kcal/kg NAR coal at 600 yuan/t FOB, said the trader.
A second trader from Inner Mongolia reported steeper price rise of 5,000 Kcal/kg NAR coal than that of 5,500 Kcal/kg NAR coal, citing severe supply shortage at northern ports.
"It is slightly profitable to bring 5,500 Kcal/kg NAR coal from production regions to northern ports but loss-making for 5,000 Kcal/kg NAR coal," said a third Inner Mongolia-based trader. "The rail shipment cost, mine-mouth prices and short-distance freight rate are all fixed."
Spot prices have stabilized obviously in recent days, and could go up in the days ahead, said a fourth trader in Inner Mongolia.
"I'm planning to buy 50,000 tonnes of Inner Mongolian 5,500 Kcal/kg NAR coal at 675 yuan/t FOB, but the seller offered it at 680 yuan/t FOB," he noted. "Another trader offered me Inner Mongolian 5,000 Kcal/kg NAR coal at 600 yuan/t FOB."
Some participants expected favorable factors to continue to underpin spot thermal coal prices in the short run, while most traders expressed uncertainties over the long-term market. There were also a few traders anticipated prices to retreat in December.
On November 27, the Fenwei CCI Thermal index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed at 679 yuan/t FOB with 17% VAT, rising 5 yuan/t day on day and up 9 yuan/t week on week.
The Fenwei CCI Thermal index showed domestic 5,000 Kcal/kg NAR coal increased 8 yuan/t from a day ago to 597 yuan/t FOB with VAT on the same day, which was up 15 yuan/t from the week-ago level.
Sources: Fenwei Energy
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