China's thermal coal extends rally amid pre-holiday buying

Mysteel Global: China's spot thermal coal prices at northern transfer ports continued rising on 11 September, as pre-holiday purchases from domestic end-users remained strong, sources reported.

On Wednesday, Mysteel's assessments for the 5,500 kilocalories (kcal)/kilogramme (kg), 5,000 kcal/kg, and 4,500 kcal/kg NAR thermal coal grades were RMB 855/tonne (t) ($120/t), RMB 760/t, and RMB 665/t, respectively, FOB northern ports with VAT, all up by RMB 5/t from a day ago.

The successive price rises were mainly driven by an improvement in trading activity at northern ports, as downstream buyers quickened their pace of building up coal inventory ahead of the Mid-Autumn Festival holiday over 15-17 September, sources said.

Yesterday, the number of vessels anchoring off the eight ports monitored by Mysteel in North China reached 46, up by 15 from a week earlier, and the number of vessels scheduled to arrive in these ports stood at 59, compared with 42 a week prior.

Among all grades, 5,000 kcal/kg NAR remained the most sought-after one in the market, with multiple transactions sealed at around RMB 760/t FOB with VAT, compared with RMB 752-760/t a day ago, Mysteel learned from sources.

Market insiders disclosed that buying demand from power plants in South China has remained strong, as their coal consumption has risen because of the unexpectedly high temperatures in the region. As a result, coal stocks at coastal power plants are currently averaging around 14 days of use, which is considered low for this time of the year.

Additionally, the limited availability of premium coal cargoes in the market has also contributed to the price rally. Sellers at northern ports further lifted their offers by RMB 5/t yesterday, with 5,500 kcal/kg NAR coal quoted at RMB 855-870/t, 5,000 kcal/kg NAR coal at RMB 755-770/t, and 4,500 kcal/kg NAR coal at RMB 660-670/t, FOB with VAT, Mysteel learned.

The port price rally has encouraged more miners in major producing regions to hike their selling prices. On Wednesday, 25 out of the 123 thermal coal mines that Mysteel tracks in Shanxi, Shaanxi and Inner Mongolia raised their selling prices by RMB 12/t on average, although three others cut theirs by RMB 8/t on average.

China's leading coal mining group Shenhua increased its purchasing prices by RMB 10-15/t for 4,500-5,500 kcal/kg NAR coal sourced from other mines in Inner Mongolia, effective 11 September. This price increase has also cemented the bullish sentiment among miners.

Meanwhile, the seaborne import thermal coal market also saw accelerated transactions, with many Chinese coastal power plants tendering for mid-November-delivering thermal coal cargoes, sources said.

China's southern state-owned power generator Yudean, or Guangdong Energy Group, reportedly bought 13 cargoes as it closed a tender yesterday, with all bids for 3,800 kcal/kg NAR coal below RMB 499/t, DDP with VAT, netting back to around $53/t FOB Kalimantan on a Panamax basis.