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China’s coal market may be stable during heating season

China’s thermal coal market is expected to stay stable on the whole this winter, thanks to government measures to boost supply in a peak demand season.

Current market showed signs of stabilization after previous downward trend. Yet, some miners opted to adjust down coal prices to ease pressure of high stocks.

The mine-mouth coal price further decreased in Yulin, Shaanxi and coal sales were tepid in Shenmu and Fugu, with high stocks at mines. Ordos, Inner Mongolia also reported flat sales amid sluggish demand.

One east China-based trader said they held a wait-and-see attitude towards the future market, as buyers had enough stocks and were reluctant to purchase. However, they may purchase a few based on market changes.

“Coal market was stable at transfer ports,” said one trader at Qinhuangdao port. “Coal sales recovered with the increase of coal inflows and anchoring vessels. However, future market may further weaken.”

The price of 5,500 Kcal/kg NAR thermal coal with 0.6%-0.8% sulfur was 670-675 yuan/t; that of 5,000 Kcal/kg NAR coal at 585-590 yuan/t, both FOB at Qinhuangdao port, he noted.

China’s coal market was rational in October, with the release of advanced production capacity coupled with accelerated rail transport. In November, coal consumption has increased as northern cities entered heating season. However, coal supply could be secured under relevant supportive policies in the winter.

Shanxi Securities analyzed that coal supply may exceed demand in generally, with ongoing release of advance capacity. However, thermal coal demand may increase during the heating season, as hydropower output was not enough and new energy played limited role. This may reduce downside room of prices.

This opinion was also agreed by GF Securities, analysts with which said thermal coal demand may increase, fueled by rising coal consumption for heating purposes. Environmental protection may exert some influence on operating rate of China’s energy-intensive industries and curb coal demand to some extent, but demand shrink may be offset by firmer buying interest from residential sector.

The increase of coal supply slowed down, as mines controlled output for the sake of safety during November-December. And, thermal coal demand may increase further, backing up prices.
Source: Fenwei Energy Information Services Co. Ltd.

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