Chinese imported thermal coal demand weakens as utility stocks pile up

2013-12-13

Several power utilities in China are already covered for their requirements in the run-up to the Lunar New Year and demand appears to be weakening this week, sources said Thursday.

"Most of the power plants in Shanghai already have full stockpiles. Some may take a few cargoes if arrival is before January 31, but we are already seeing signs of slowing down," a Singapore-based trader said.

However, a Shanghai-based trader said most power plants across China are "more than" fully covered.

He said February-arrival cargoes were eliciting little interest from end-users. However, some traders were willing to take positions and very few cargoes were getting sold for February deliveries.

In light of the scarcity of January-delivered cargoes and higher offer prices, Chinese thermal coal buyers are now taking a cautious approach to the first-quarter market, sources said.

A mini-Capesize cargo of 5,500 kcal/kg NAR Australian coal was heard offered at $86/mt CFR eastern China for January, a Beijing-based trader said.

"I think this is it before the Chinese New Year holiday," said the trader. He said he would not consider booking new cargoes unless there are very good offers, at $83/mt CFR south China for example.

Higher freight rates were also deterring Chinese buyers from booking seaborne coal, sources said.

Capesize freight rates from Australia to south China have shot up to $18/mt from about $13/mt in just 10 working days, a second Beijing-based trader noted, adding that this would push up offer prices on a delivered basis.

"We have decided not to book any cargoes for delivery before the Lunar New Year," a Shandong-based trader said. "It is inappropriate for us to make [imported coal] purchases when domestic thermal prices seem to be controlled by some large players."

For a better position in the upcoming annual coal production, sales and transportation talks, China's main coal miners were said to be pushing up domestic thermal coal prices by reducing their supplies, sources said.

"The market will definitely cool down after the Chinese New Year holiday. The domestic coal price is very likely to drop after the holiday," said the second Beijing-based trader said.

Domestic coal with a calorific value of 5,500 kcal/kg NAR is being traded at Yuan 610-620/mt FOB Bohai ports, according to sources.

However, some sources said Chinese domestic 5,500 kcal/kg NAR thermal coal is now available at about Yuan 605-615/mt, or Yuan 517-526/mt without VAT, FOB Qinhuangdao Port, up about Yuan 15/mt week on week.

At the close of Asia trade Thursday, the Platts/Fenwei China Coal Index (CCI 1) for domestic thermal coal traded at Qinhuangdao port was assessed at Yuan 625/mt inclusive of VAT, up Yuan 5/mt from Wednesday.

Platts assessed FOB Qinhuangdao 5,500 kcal/kg NAR coal for delivery in the next 7-45 days at Yuan 533/mt, up Yuan 5 on the day.

HIGHER OFFER PRICES

A Shanghai-based trader said he is offering half of a mini-Capesize cargo of 5,500 kcal/kg NAR Australian thermal coal at about $86/mt CFR eastern China for delivery in late February, but has not met much buying interest.

The other half of the mini-Capesize cargo was heard to have been sold at $84.50/mt CFR earlier this month.

"The offer price [of $86/mt CFR] is too high, and we are not sure about the February thermal coal market in China," a Guangdong-based trader said.

Capesize cargoes of higher-ash Australian 5,500 kcal/kg NAR coal for January loading were being offered at $72.50/mt FOB, as heard through broker Marex Spectron. Bids for these cargoes were at $71.25/mt FOB.

February cargoes of Australian 5,500 kcal/kg NAR were being offered at $72/mt FOB while bids were at $71.75/mt, heard through the same broker.

Not all Chinese traders are deterred by the high offer prices of overseas high-CV thermal coal. A Panamax cargo of 5,800 kcal/kg NAR Australian thermal coal with less than 20% volatile matter was reportedly sold at about $90.50/mt CFR northern China for late-January loading.

Compared to the current mainstream offer prices of about $72/mt FOB for 5,500 kcal/kg NAR Australian thermal coal, the landed price of $90.50/mt CFR is considered "reasonable" for Australian 5,800 kcal/kg NAR by a second Shandong-based trader.

The CFR South China (CCI 8) price was assessed at $84.60/mt basis 5,500 kcal/kg NAR excluding Chinese VAT, up 10 cents on the day.

Platts price assessment for cargoes of 5,500 kcal/kg NAR coal for arrival in south China ports in the next 15-60 days was at $84.85/mt CFR, up 10 cents from Wednesday.

Typical 20% ash Newcastle 5,500 kcal/kg NAR coal for loading in the next 7-45 days was assessed at $72.20/mt FOB, up 20 cents on the day.

Source from : Platts

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