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Downturn in China’s Thermal Coal Market Pressures Global Prices

China’s thermal coal import market exhibited continued sluggishness this week, prompting traders to reduce bid prices in utility tenders amid heightened selling pressure. Bids for 3,800 Kcal/kg NAR coal in southern China were noted at 516-519 yuan per ton, DDP with VAT, reflecting a nearly 20 yuan decrease from the previous week. This shift has subtly influenced Indonesian suppliers to adjust their offer prices, though some remain firm, complicating arbitrage opportunities for importers.

For July-loading, Panamax cargoes of 3,800 Kcal/kg NAR coal were offered between $55.5 and $57 per ton FOB, whereas Chinese buyers proposed $54 to $55 per ton. Meanwhile, Supramax cargoes of the same calorific value were offered at $53 to $54 per ton FOB, with counteroffers even lower, indicating a downward pressure on prices due to ample supply and aggressive market tactics to secure orders.

Amid these developments, a major Chinese utility issued tenders for 1.05 million tonnes of imported coal, ranging from 3,000 to 5,300 Kcal/kg, for delivery between mid-June and late September, signaling a potentially pivotal moment for market prices. Despite the pessimistic outlook on near-term bidding prices, traders foresee limited downward potential due to thin profit margins.

Adding to the complex market dynamics, continuous heavy rainfall in southern China has dampened coal consumption. This weather, combined with ongoing imports, has exacerbated the stockpile situation at ports, prolonging vessel discharging times and possibly leading to further price reductions for both imported and domestically-traded coal.

In terms of high-calorific value coal, Indonesian 4,700 Kcal/kg NAR was offered at a $2.5 premium to the index, while Australian 5,500 Kcal/kg NAR coal dropped to around $90 per ton FOB. On the trading floor, offers for various grades of coal remained relatively unchanged from the beginning of the week, although the market sentiment continues to weaken, with some offers becoming negotiable.

The Coal Indices (CCI) reflected the downtrend with the index for Indonesian 4,700 Kcal/kg NAR thermal coal at $85.0 per ton CFR South China and $76.5 per ton FOB Kalimantan, marking declines from the previous day. Similarly, the index for Indonesian 3,800 Kcal/kg NAR coal was assessed at $65.0 per ton CFR and $54.5 per ton FOB, also showing a drop.

This sustained pressure on coal prices in China could foretell more widespread adjustments in the global coal market, especially if Chinese consumption fails to rebound in the coming months. The coal market thus remains a focal point for both economic and environmental discussions globally as supply chains and demand forecasts continue to evolve in response to both market and climatic conditions.

Source: SxCoal