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China’s seasonal demand lull to hit thermal coal prices

China’s market for thermal coal is expected to lose further ground this month, dampened by the potentially weaker replenishment interest among most end-users in spring, according to Mysteel’s latest monthly report.

The pessimistic outlook assumes a waning trend in thermal coal consumption in April, the report says, as electric power stations, the largest buyers of the fossil fuel in China, will generate less power and so burn less coal amid increased hydropower output in the rainy season. Overall power demand across the country will also fall.

In addition, many domestic chemical plants will kick off their spring maintenance this month, which means that they would also rein in their procurement of the fuel. Though cement demand may see some growth alongside the recovered construction activities in the country, the pace of thermal coal buying from cement plants could be curbed by the softening of the thermal coal market, according to the report.

It pointed out that downside pressure on thermal coal prices could mount this month due to the loose market fundamentals. However, uncertainties remain because should the drought affecting Southwest China’s Sichuan since late last year continue, this could weigh on domestic power generation from hydroelectric dams.

On the supply side, the country’s thermal coal production will likely see only mild rises in April, as strict safety inspections being conducted by local authorities could remain in place to curb the miners’ pace of lifting operations.

Nevertheless, a supply surplus of the fuel remains in the market. In fact, over March 22-28 daily coal output among the 462 domestic thermal coal mines that Mysteel monitors nationwide increased to 5.71 million tonnes/day, higher by 3.9% on month and up by 9.2% compared with the year-ago level.

By contrast, coal demand from power plants kept declining last month, mainly as households cranked down heating devices as temperatures climbed quickly in many regions. This was evidenced by the growth of 2-4 degrees Celsius in average temperatures across the country in late March compared with last year, according to the country’s National Meteorological Centre.

In parallel, Mysteel’s survey also showed that daily coal consumption among the 260 power plants under its monitoring averaged 2.26 million t/d in March, lower by 8.5% on month. As a result, though the utilities firms’ coal stocks were lower by 6.3% on month, as of March 28 these were still sufficient for 20.1 days of consumption, up from 19.7 days a month earlier.


Consequently, thermal coal trades stayed at the low ebb on most days during March though some brief improvements were seen later in the month as bearish sentiment among some buyers eased. This helped to offset some of the previous losses in coal prices, the monthly report said.

For example, as of March 29 Mysteel’s assessed price of 5,500 kcal/kg NAR thermal coal (ash<12%, VM<37%, sulfur<0.8%) produced in Ordos city, a key coal-mining hub in North China’s Inner Mongolia, had declined to Yuan 580/tonne ($80.2/t), lower by Yuan 100/t on month. The price was also lower by Yuan 150/t compared with the year-ago level, on mine-mouth basis and including the 13% VAT.

In parallel, Mysteel’s assessed price of 5,500 kcal/kg NAR thermal coal traded at Qinhuangdao port, the largest coal transfer port in North China’s Hebei province, had declined by a cumulative Yuan 95/t on month to Yuan 835/t as of March 29, on FOB basis and with VAT included. The price was significantly lower than the Yuan 1,090/t recorded a year earlier.


As of the same day, total coal inventories at the eight major ports in North China had climbed by 5.6% on month to 21.58 million tonnes, though this was lower by 14% from the year-ago level, the results of another Mysteel survey showed.

Written by Tammy Yang