China thermal coal prices range-bound at high level in Aug Viewpoint,  Thermal Coal 2017-09-06 11:53:00

Prices of Chinese thermal coal generally followed a V-shape trend in the past month. Continuous price drop lasted before picking up in the last few days of the month.

The Fenwei CCI Thermal index accessed price of 5,500 Kcal/kg NAR coal dropped to the month-low of 620 yuan/t on August 25, down from 640 yuan/t FOB on August 1, which was 5 yuan/t below July's highest. It climbed up 6 yuan/t in the rest days to 626 yuan/t on August 31.

With temperature cooling down across the country, residential power consumption has declined since late August, so did the use of thermal coal for generation of electricity. data showed daily coal consumption generally kept an upward trend at six major coastal utilities in most days of August, before sliding down in the last few days.

Daily consumption of the fuel at these power firms climbed from 753,000 tonnes from August 1 to a record high of 844,000 tonnes on August 24, and then dropped back to 744,000 tonnes on August 31.

Correspondingly, coal stocks at these power plants increased from 13 days of use on August 24 to 16 days at end of the month. Even though inventories of some inland utilities remained low at present, they may not restock greatly until late October when the winter coal consumption peak kicks off.  

Coal prices had been in a relatively high level in the first half of the year and went up even higher in July when huge amounts of coal were burnt to generate electricity for air conditioning purpose amid scorching temperature.

To stabilize the exorbitant prices, the National Development and Reform Commission (NDRC) held special conferences with Shenhua and other coal giants and issued several documents to encourage coal mines to expand production.

China's coal production totaled 308.35 million and 294.38 million tonnes in June and July, up 12.1% and 10.6% from a year ago, respectively. Output is anticipated to go up further in August.

However, prices were moving up in the last week of August, which industry insiders said was closely linked to bullish sentiments on the market.

Coal production were severely hit in Shanxi ‒ China's second-largest coal base ‒ during August when local safety watchdogs asked many mines to halt production and find security vulnerabilities in the wake of three mine accidents occurred in the province within the month.

Stringent production restriction was likely to continue in ways like sales ticket and initiating exploding devices controls for safety concerns before and during the 19th CCP National Congress, as well as the 13th Session of the Conference of the Parties to the UNCCD convenes, which will be hosted in Ordos, Inner Mongolia.

While many industry insiders predicted prices to go down late this month, price rise since this week has been a bullish note encouraging traders to stock up on the material, though buying interest from utilities remain flat for the moment.  

(Writing by Alex Guo  Editing by Harry Huo)
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