Bearish sentiment dominates China's thermal coal market

China’s spot thermal coal market paused its week-long rally on July 1, as buying momentum gradually weakened as downstream traders largely completed their purchases to meet contractual delivery obligations, according to market sources cited by Mysteel.

On Tuesday, Mysteel assessed NAR thermal coal prices for grades 5,500 kcal/kg, 5,000 kcal/kg and 4,500 kcal/kg at CNY619/mt (US$86.4/mt), CNY549/mt and CNY484/mt (FOB Northern Ports, VAT included), unchanged from the previous day.

Demand for all grades of thermal coal declined yesterday as buyers adopted a tougher stance on prices. However, sellers are still hesitant to make concessions, expecting that hot weather in July and August will boost coal demand.

According to market sources, offers for 5,500 kcal/kg NAR thermal coal were hovering around CNY615–625/mt, 5,000 kcal/kg NAR at CNY550–560/mt, and 4,500 kcal/kg NAR at CNY480–490/mt (FOB including VAT). However, buying demand was mainly concentrated at CNY485–CNY489/tonne for 4,500 kcal/kg NAR and CNY550–CNY552/tonne for 5,000 kcal/kg NAR, with very few buying prices recorded for 5,500 kcal/kg NAR, according to Mysteel.

China officially entered the main flood season on July 1. According to the forecast from the Ministry of Water Resources of China, the overall weather pattern in July and August will be of floods in the north and drought in the south. This could boost demand for coal-fired power generation, as most hydropower plants are located in the south and southwest, some market sources said.

However, it should also be noted that as the flood season approaches, the recent increase in hydropower output could reduce coal power output, signaling a possible cooling in coal demand in the short term.

As of July 1, the Three Gorges Dam reservoir discharge flow reached 25,000 m³/s, up significantly from 18,400 m³/s the previous day, according to data from Mysteel. The discharge flow has been rising steadily since June 28, when it was recorded at 17,200 m³/s.

The thermal coal market in China's coal mines remained stable on Tuesday. Some mines resumed operations after maintenance shutdowns late last month, leading to a slight recovery in coal supply, sources said.

Of the 145 thermal coal mines surveyed by Mysteel on Tuesday, 14 mines raised their average selling prices by 8 yuan/t, while 11 mines cut their prices by 9 yuan/t on average. The remaining 120 mines kept prices unchanged.

Source: Mysteel