China: Coking coal prices have limited downside room as demand expected to pick up

The downside space of coking coal prices in China may be limited, given the increasing likelihood of concentrated replenishment from coke producers after their feed coal stocks dropped to the lowest level in more than three years.

Sxcoal data showed on November 29, coking coal stocks at the surveyed independent coking plants fell to 3.02 million tonnes, down for the fourth straight week and notching a new low since June 26, 2017. Some coking plants with coal stocks at historical low levels would have to replenish to maintain stable production.

Some Inner Mongolia-based miners contacted by Sxcoal reported growing orders from coke firms last week, which has slightly eased their inventory pressures and spurred price corrections. Some miners in Wuhai of the region started to shore up prices to make up the previous overcut in prices.

Encouraged by improved demand and resultant fast decline of coal inventories, some washing plants and miners in the city made around 50-100 RMB/t upward corrections for fat coal prices late last week.

On November 29, the mainstream offers of fat coal (S 0.8%, A 12%) in Wuhai were at 1,450-1,550 RMB/t and mid-sulfur fat coal at 1,300-1,400 RMB/t, ex-washplant with VAT and on banker's draft.

Coking coal prices were comparatively stable in Shanxi at the start of the week. One Linfen-based miner in the province offered low-sulfur primary raw coking coal (S 0.6%, A 8%, G 85) stable at 1,010 RMB/t, mine-mouth with VAT and in cash, and sales did not improve much.

High-sulfur fat coal (S 3.6%, A 10.5, G 97) was provided by a second miner in the city steady at 1,650 RMB/t, ex-washplant with VAT.

Traders remained on the sidelines, waiting for more clarity in the market.

On November 29, Fenwei CCI index for Shanxi low-sulfur primary coking coal stood at 2,290 RMB/t, and the index for Shanxi high-sulfur primary coking coal was at 1,733 RMB/t, ex-washplant with VAT, both unchanged compared with late last week.

While Chinese buyers still maintained small purchases of Mongolian coking coal, inflows are expected to be further affected on tightened anti-pandemic measures at border crossings.

Erenhot border crossing in northern China's Inner Mongolia autonomous region announced to suspend non-containerized coal imports via railway from November 28 until further notice, as one of the measures to contain the spread of the virus. Road coal transportation in the gateway remained closed as of November 29.

Ceke border crossing, the second largest coal port between the two countries, was also suspended with resuming schedule in a pending state.

Ganqimaodu, the largest coal checkpoint, cleared 566 trucks loaded with Mongolian coal on November 27, but the near-term arrivals of trucks would be partly dependent on the COVID-19 infections.

Coke prices to stabilize after 8th 200 RMB/t reduction

China's metallurgical coke prices are expected to stabilize after the completion of the eighth round of 200 RMB/t price reduction late last week.

The cut brought the total reduction to 1,600 RMB/t so far in November and coke profit margins to low levels.

Some coke producers in Shanxi worked together to boycott further price reduction after the eighth cut, while mills may be less inclined to cut coke prices amid improved profit.

This article has been published under an article exchange agreement between CoalMint and SX Coal.