China's major ports are preparing for the peak summer

Inventories at China's key coal transshipment ports of Qinhuangdao and Caofeidian fell against the previous week. Regional authorities are showing signs of resisting the central government's directions to raise domestic output, complicating a target to maintain inventories at Qinhuangdao above 5mn t for the summer restocking season.
 

A potential release of pent-up demand for coal from the coal-consuming cement sector may tighten the supply outlook further. Prices of cement in many parts of China have risen sharply this week, at levels usually only seen in the final quarter. Some market participants attribute this to environmental inspections that have restricted cement output and a surge in infrastructure projects that is fuelling demand. China's construction sector consumed 490mn t of coal in 2020, according to data from coal industry association the CCTD, with most of this taken by cement manufacturers.
 

Coal stocks at Qinhuangdao were 4.48mn t yesterday, down from 4.51mn t from a week ago, according to data from coal industry association the CCTD. The country's main economic planning agency the NDRC has held three meetings in recent weeks to address measures to avert a looming coal shortage during the summer when air-conditioning demand is expected to peak. It set a target of maintaining stocks at Qinhuangdao no less than 5mn t for the summer restocking season. But this has been frustrated by enhanced safety inspections focused on the coal sector following two recent high-profile mining accidents involving multiple fatalities.
 

Inventories at Qinhuangdao would probably have dipped much lower if Caofeidian port, also located in Hebei province, had not taken the brunt of restocking demand in the past week. Stocks at Caofeidian fell sharply to 4.74mn t yesterday from 5.45mn t a week earlier. Such a significant week-on-week drop was last seen during the worst of China's coal shortages late last year when heating demand surged against tight supplies.
 

The NDRC did not set a specific summer target for Caofeidian, which may have prompted the redirection of restocking demand there to keep inventories at Qinhuangdao nearer to the 5mn t target, market participants said.
 

Authorities in Inner Mongolia earlier in the week rolled out the third wave of safety inspections this year on the coal sector since, after it suspended at least seven mines with a total capacity of around 20mn t/yr for environmental protection reasons. Authorities in Shaanxi, another key coal-producing region, are cracking down on producers exceeding their allocated output capacity.
 

China's national coal mine safety administration said yesterday that it will adopt a "zero-tolerance" policy towards breaches of safety protocols by the coal sector. It held a national level meeting for safety inspectors and coal producers from every province in the wake of the fatal mine accidents. China's domestic physical and futures market firmed up significantly on expectations that regional curbs on output will complicate the NDRC's plans to avert summer coal shortages. The actively traded May coal futures contract on China's Zhengzhou commodity exchange closed at 739.40 yuan/t ($113.13/t) yesterday, up from Yn728/t the previous day.
 

Inbound deliveries to Qinhuangdao for the week to yesterday were 2.93mn t, down from 3.3mn t for the previous week, according to the CCTD. Offtake for the week to yesterday was 2.96mn t, down from 3.2mn t the previous week. The daily vessel queue at the port averaged 32 for the week to yesterday, down from 36.7 the previous week, according to Argus calculations based on CCTD data.
 

The drop in the vessel queue could be attributed to a sharp increase in coastal freight rates to a multi-year high. Rates for a 50,000-60,000t vessel delivering coal from Qinhuangdao to south China's Guangzhou were Yn69.30/t yesterday, the highest since 11 January 2018, according to CCTD data.
 

Inbound deliveries to Caofeidian for the week to yesterday were 1.3mn t, down from 1.59mn t the previous week. Offtake for the week to yesterday was 1.63mn t, down from 1.78mn t the previous week. The daily vessel queue at the port averaged 11.3 for the week to yesterday, down from 12 the previous week.

Source: Argus

Please Contact Us at：

media@xindemarine.com