China's 5,500 Kcal coal prices touch 900 yuan, but losing steam

China's domestic thermal coal prices have been on an upward trajectory since late August, propelling the benchmark 5,500 Kcal/kg NAR coal to approach 900 yuan/t on September 7. However, the market has begun to loss steam as buyers started to pull back once more.

 

Offers for 5,500 Kcal/kg NAR thermal coal were primarily at 880-900 yuan/t FOB with VAT at northern ports, according to market sources. The 5,000 Kcal/kg NAR was mainly quoted at 770-790 yuan/t and the 4,500 Kcal/kg NAR at 660-680 yuan/t.

 

Demand for spot coal subdued significantly during the session. Traders disclosed a trade for some 5,000 Kcal/kg NAR coal with 1.0% sulfur failed to conclude at 750 yuan/t, while some 4,500 Kcal/kg NAR coal was unable to sell at 660 yuan/t.

 

A Hebei-based trader, who was negotiating on a Shanxi 5,500 Kcal/kg NAR cargo with 1% sulfur at 880 yuan/t, reported an offer of 900 yuan/t for a 0.3% sulfur cargo in the morning, which was counted by 895 yuan/t.

 

A Qinhuangdao-based trader noted the primary buying interest was around 750-760 yuan/t for 5,000 Kcal/kg NAR coal.

 

Fewer trades were concluded in the market. Traders reported a 5,000 Kcal/kg NAR deal at 780 yuan/t FOB.

 

Traders predicted that the market would be stagnant until more clear signals emerge in the ongoing price negotiations between buyers and sellers,

 

Sellers were still supported by the cost side, with some reporting the cost for delivering Shanxi 5,500 Kcal/kg NAR coal to northern ports totaled 900 yuan/t at least. The cost for Inner Mongolia-based coal may even be higher because of shortage.

 

Buyers left the market as they believed the recent price spikes were driven by speculations rather than a change in fundamentals, citing continuous falls in coal consumption at coastal power plants as air-conditioning demand has abated.

 

Power plants have been supplemented by strong influx of seaborne import cargoes. The latest customs data showed China's coal imports for August jumped over 50% on the year to 44.33 million tonnes, which also represented a 13% growth from July.

 

"There is no basis for a sustained increase in prices in the market, as power plants have ample supply," said a Zhejiang-based trader.

 

However, a hike in the top coal mining group's purchasing prices may help bolster the sentiment. The mining group raised buying prices for third-party coal by 32 yuan/t for three major grades, effective September 6.

 

The price adjustment has prevented sellers from offering discounts immediately, as they paused for more clues before the next move.

 

On September 7, the CCI index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed by Sxcoal at 875 yuan/t FOB with VAT, flat from a day ago; 5,000 Kcal/kg NAR coal assessment was at 774 yuan/t and that for 4,500 Kcal/kg NAR at 665 yuan/t, both unchanged as well.

 

At northern mining areas, the uptrend continued with a 10-20 yuan/t rise at some mines. Safety inspections remained in place and showed no signs of easing, prompting buyers to compete for limited cargoes.