Market sentiment has shifted from downbeat to upbeat in China's coastal thermal coal market, as demand continues to pick up while spot supply further tightens.
Some cement plants in south China have showed growing appetite for Shanxi coal, which was in short supply at northern ports, trade sources said. This has injected some upward momentum into the spot market.
Yet, lots of utilities still lacked incentive in taking spot coal and continued to bid low for the material, traders said.
One Hebei-based trader projected prices to leap 20-30 yuan/t next month if no government intervention, citing rising utility coal burn as the main driver.
One Shanxi-based trader offered Shanxi 0.6% sulfur 5,000 Kcal/kg NAR coal at 590 yuan/t FOB with VAT, against bid of 575 yuan/t. The transaction was eventually concluded at 585 yuan/t, said the Hebei-based trader.
The trader said 0.8% sulfur 5,500 Kcal/kg and 5,000 Kcal/kg NAR coal was most offered at 675-680 yuan/t and 590-595yuan/t, respectively.
Offer price for Inner Mongolian 5,500 Kcal/kg NAR coal, standing at 675 yuan/t now, may slide to 650-660 yuan/t before bouncing back, said one Tianjin-based trader.
Cargoes of 5,500 Kcal/kg NAR coal may ramp up to 700 yuan/t by mid-December through January, he predicted. "By then utilities are expected to start restocking for the Spring Festival, but import coal may still face constraints in entering China," explained the trader.
The rise of coal burn at power plants could signal further uptick in the coastal coal market, said a Beijing-based trader.
Import restrictions and rail bottleneck also provide support for prices at northern ports, he said. Coal prices at production areas may remain hard to stabilize in the short term, given flat inland demand, he noted.
Data showed that daily coal burn at the six leading coastal utilities leaped to 0.65 million tonnes on November 24, staying above 0.6 million tonnes for over one week and up 4.8% over the week.
The expected price markup may be modest, much to depend on the strength of demand from utilities, remarked a port-based trader.
One Zhejiang-based trader reported that shipping rate for 40,000-50,000 DWT vessels has gained 20 yuan/t to 60 yuan/t from northern ports to east Jiangyin port.
This freight spike offset a 10 yuan/t price fall and added traders' cost, rendering most traders in disadvantageous position when talking with utilities, he pointed out.
On November 24 the Fenwei CCI Thermal index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed at 674 yuan/t FOB with 17% VAT, rising 3 yuan/t day on day and week on week.
The Fenwei CCI Thermal index showed domestic 5,000 Kcal/kg NAR coal increased 5 yuan/t from a day ago to 589 yuan/t FOB with VAT on the same day, which was up 7 yuan/t from the week-ago level.
(Writing by Jessie Jia Editing by Harry Huo)
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