Chinese domestic thermal coal prices may spike after holidays amid stringent checks: sources

21-January-2019

Chinese domestic thermal coal prices may likely see a spike after the Lunar New Year holidays with the full impact of the recent mining accident taking effect, sources said.

A coal mine in north eastern Shaanxi province collapsed earlier this month, claiming the lives of 21 people and prompting Chinese authorities to adopt stricter safety measures, including shutting down mines and conducting stringent checks on mines in other coal producing provinces as well.

Offers from domestic miners jumped as much as Yuan 50/mt since the accident in Shaanxi, while prices at Qinhuangdao port rose by a mere Yuan 3/mt since last Friday amid high stocks.

Stockpiles at both ports and power plants have remained elevated in recent times, with stocks at utilities enough to last for nearly 19 days of coal burn.

Chinese domestic 5,500 kcal/kg NAR grade of coal was assessed at Yuan 588/mt FOB Wednesday, up Yuan 8/mt since the start of the year, S&P Global Platts data showed.

“Right now, there’ll still be some restocking, but we don’t see much impact on prices yet as the accident happened when there had not been much buying activities,” a China-based trader said.

Market sources in China expect safety checks to continue until at least end-March, and this may provide a boost to domestic prices after the Lunar New Year holidays starting early February.

“We know prices will go up after Lunar New Year, but it’s difficult to restock a lot right now as we’ve more than enough stocks, especially with the continued arrival of import cargoes,” a buyer said.

The most actively traded May futures contract on the Zhengzhou Commodity Exchange rose 4% from its settlement of Yuan 560/mt on Friday to about Yuan 583/mt at 4 pm (0800 GMT) Thursday, following news of the mine accident.

The mining accident has also prompted some buyers to turn to the seaborne market pushing up import prices in recent days.

“We understand that all privately owned mines in Shenmu county were forced to suspend operations the day after the accident. We have also heard that mines in adjacent Fugu county — another large coal mining area — may also be subject to suspensions,” energy consultancy firm Wood Mackenzie said in a recent note.

The consultancy firm added that domestic supply could tighten if stricter checks were extended to other provinces, “helping coal imports as a result.”

Source: PLATTS