With prices no longer appealing after previous hikes, China's domestic thermal coal market pulled back on October 11, moving against expectations that the price rally could last throughout the week.
The benchmark 5,500 Kcal/kg NAR thermal coal was primarily offered at 1,030-1,050 yuan/t FOB with VAT at northern transfer ports, down from 1,050-1,070 yuan/t a day ago; 5,000 Kcal/kg and 4,500 Kcal/kg NAR cargoes were separately quoted at 920-950 yuan/t and 770-790 yuan/t, down from 930-960 yuan/t and 780-800 yuan/t in the previous day.
The decline came after a brief stabilization from a three-day rally post the National Day holiday. Traders acknowledged the hikes were too fast and led end users to cease pre-winter restocking. The upcoming arrivals of Australian coal imports in the second half of the month will help ease coastal utilities' thirsty for high-CV cargoes.
Facing retreated buying passion, sellers softened offers with negotiations open. A Tianjin-based trader offered 5,000 Kcal/kg NAR thermal coal with 1% sulfur, but prices of 920-925 yuan/t could be actually workable.
For 4,500 Kcal/kg NAR coal, offers stood at 790 yuan/t against the buying interest at 775 yuan/t.
Trading liquidity weakened significantly related to previous days. A Zhejiang-based trader reported no other trades were heard other than one – where a low-sulfur Shanxi 5,000 kcal/kg NAR cargo was traded at 933 yuan/t – in the early morning.
"In the afternoon, we heard a Shanxi 5,000 Kcal/kg NAR cargo with 1% sulfur can be negotiable at 913 yuan/t already," he said.
Some sellers began to worry about sales, fearing losses if the downward trend continues, as their cargoes were bought at high price levels.
However, some others believed the prices could pick up again after touching the trough of 900 yuan/t, citing the cost of moving coal from production areas.
"If miners don't lower prices while the decline continues at ports, traders will be unwilling to fetch coal from mines," said an Inner Mongolia-based trader. "Supply will be tight again to drive up prices at ports."
At major producing areas, there was a 10-30 yuan/t price reduction at some mines in Ordos, Inner Mongolia, while prices remained broadly unchanged in northern Shanxi and continued to move upward in Yulin, Shaanxi.
Several miners reported a 10-20 yuan/t rise in Yulin, yet the number of mines keeping their prices unchanged was growing. Abortions of online auctions were also reported.
Miners said the downturn at northern ports has cooled down the sentiment at main production areas, although most traders still enjoyed good sales to inland power and other end users.
On October 11, the CCI index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed by Sxcoal at 1,035 yuan/t FOB with VAT, down 5 yuan/t from a day ago; 5,000 Kcal/kg NAR coal assessment was at 926 yuan/t, down 4 yuan/t on the day, and that for 4,500 Kcal/kg NAR at 780 yuan/t, a 7 yuan/t fall.
(Writing by Alex Guo Editing by Harry Huo)
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