Is China's spot coal market rising up again? Viewpoint,  Price 2017-11-09 15:31:00

Coal prices rose silently last weekend in Yulin, Shaanxi province. On November 4, premium mixed coal prices were adjusted up by 10 yuan/t at Hanglaiwan mine; Shenshupan mine's slack coal prices also rose 10 yuan/t.

On November 6, mine-mouth price of Jinjitan mine's mixed coal were offered at 475 yuan/t or 484 yuan/t on bank's draft with VAT, also increasing 10 yuan/t.

The above three Yulin-based miners reported coal truckscrowded mines from last week. "Demand for household heating is increasing recently with the weather getting cold, especially in remote villages that haven't been covered by clean energy heating system," they explained.

Earlier, the country's biggest coal miner Shenhua Group increased spot and monthly contract prices for November by a larger margin while lowering the annual contract prices slightly. This is the first time this year the group adjusted annual and monthly contract prices in opposite way.

The series of movements that go against the market trend put players into doubts – is this a sign that China's coal market will embrace another price rally?

"Not exactly," market insiders answered, expecting coal prices would hold steady and finally come to a reasonable zone in the winter heating season.

In general, coal prices remain stable in leading production provinces like Inner Mongolia and Shanxi, as supply is still rather tight; prices of some coals continues moving down.

The most direct and powerful conclusion can be obtained from Fenwei CCI Spot 5500 index, the most authoritative and widely recognized price barometer that is compiled based on sensitive price changes at Qinhuangdao port.

From October 30, the index kept plummeting and fell below 700 yuan/t on November 3 for the first time in about half and a month since September 19. As of November 8, the index was assessed at 680 yuan/t, dropping 4.49% from the end of last month.

Once some traders were hoarding coal at Qinhuangdao port in the anticipation that they could make a killing during the winter heating season when coal prices increase. But now this speculative activity will be severely punished.  

Weeks ago, the NDRC pledged to clamp down any malicious speculative activities aimed at pushing up coal price quickly in a special working conference, including coal hoarding and false information spreading.

Meanwhile, the country's top economic body urged Shanxi, Shaanxi, and Inner Mongolia as the main force to guarantee coal supply and keep the prices in a reasonable level during the winter heating season. Price bureaus and other related departments of the three provinces should report their price monitoring information every week.

(Writing by Alex Guo  Editing by Tammy Yang)
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