China: Thermal coal prices may dip lower in Dec

• Spot prices decline by RMB 30/t m-o-m in Nov'24
  
  
• Portside stocks in northern China rise to year-high
  
  

Mysteel Global: China's thermal coal prices may extend their downtrend into December, mainly due to a surplus supply of the fossil fuel in the spot market. This follows expectations of a slight decrease in downstream demand and lower production at coal mines.

Spot prices for the benchmark 5,500 kcal/kg NAR thermal coal declined by RMB 30/tonne (t) throughout November to RMB 825/t FOB northern transfer ports, including 13% VAT, on 29 November, according to Mysteel's assessment.

Regarding market fundamentals, last month saw a significant rise in thermal coal inventories at major Chinese ports, which was quite unusual for the typical heating season. Notably, thermal coal stocks at eight northern China ports swelled to a year-high of 28.44 million tonnes (mnt) on 29 November, marking a 20.4% jump from 23.62 mnt by the end of October, according to Mysteel's tracking. In contrast, stockpiles at these ports declined in November 2023.

Mysteel's survey of the 55 ports nationwide also showed that as of 22 November, the northeast ports saw thermal coal inventories up 9.8% from the beginning of the month. Meanwhile, stocks at ports along the Yangtze River were up 17.3% m-o-m, and those at the southern ports rose 4% m-o-m. Only stocks at the eastern ports registered a 0.6% m-o-m dip.

Coal shipments from mines to ports via the crucial Daqin rail line, which connects the coal-rich city of Datong in Shanxi province to Qinhuangdao Port in Hebei province, have been operating near full capacity since the completion of the line's autumn maintenance in late October, as Mysteel Global reported.

Meanwhile, portside traders ramped up their coal purchases from Inner Mongolia, a major producing region in northern China, mainly driven by decent volume-related discounts the local railway authorities offered.

On the demand side, spot coal trading at the northern ports remained weak last month due to multiple factors, including high portside inventories, secured coal supply from long-term contracts, cheaper imported cargoes, unseasonably warm weather, and a boost in renewable energy generation.

Sources from southern power utilities informed Mysteel Global that their coal-fired units were operating at less than half of their capacity in November, as strong renewable energy supplies such as hydropower and solar power substituted a large part of coal-based power generation in the region.

Such a trend may continue with the robust installation of wind and solar capacity across the country. By the end of October, China had added 486.17 million kilowatts (kW) of wind power and 793.11 million kW of solar capacity, up 20.3% and 48% y-o-y, respectively, according to official data.

Although China's Purchasing Managers' Index (PMI) for the manufacturing industry rose to 50.3 in November, coal purchases did not get much support, as demand from the industrial sector stayed insufficient.

Looking ahead, with the imbalanced market fundamentals likely to persist, China's domestic thermal coal prices are expected to remain under pressure in December. Additionally, coal restocking for January 2025 may be limited, as the impact of the Spring Festival holiday (28 January-4 February) is likely to offset any potential surge in consumption during the coldest month of the year.