China's thermal coal prices fell to a near four-month low of 770 yuan ($117.1) a tonne on sluggish demand, further widening the premium of overseas coal prices and casting a pall on the country's import appetite.
Many buyers in China expect domestic coal prices to stay depressed at least until the end of March, citing a seasonal lull in demand, increased supplies on the back of higher rail capacity and Beijing's pressure on state-owned coal mines to keep spot prices low.
The fall in prices this week came despite heavy fog in the Bohai sea disrupting shipments for several days in the northern Qinhuangdao and Tangshan ports last week and earlier this month, traders said, underscoring the fact that most power plants remain well-stocked.
Coal with a heating value of 5,500 kcal/kg fell 5 yuan from a week ago to 770-775 ($117.10-$117.80) on Tuesday, while stocks at top coal port Qinhuangdao rose 3.4 percent to 7.53 million tonnes, data from industry website sxcoal.com showed.
Coal with heating value of 6,000 kcal/kg (NAR) was steady at 825-835 yuan.
"All the buyers I've spoken to are bearish about prices all the way through to March and are reluctant to commit to large purchases," said a Shanghai-based coal trader.
"Some traders are hopeful that prices will start to rise in April as utilities begin stockpiling for summer, but I think that depends on the overall economy and the state of inflation."
This week's fall in Chinese prices has further widened the gap with overseas prices. Arbitrage opportunities are seen likely to remain closed for at least the next 2-3 weeks with international coal prices set to rise further as they track oil's gains amid unrest in the Middle East.
"This year could turn out to be a surprising one when China again defies expectations by importing little," said Emmanuel Fages, a commodities analyst with Societe Generale.
Prompt physical coal prices for South African cargoes rose over a dollar to $119.25 a tonne this week, while prices for Australian cargoes have jumped nearly 8 percent to $136.50.
Overseas traders said China's demand for imported coal remains very subdued and most of the enquiries received were for sub-bituminous materials from Indonesia, with only supplies from small mines competitive.
China's steam coal prices began a downward trend in early December and have shed around 22 yuan per tonne since their 2010 peak struck in November.
Inventories at power plants were hovering at around 20 days of daily consumption, while some plants in the coastal city of Zhejiang have nearly 26 days of consumption, industry sources said. Weekly Qinhuangdao prices for (Yuan) PORT STOCKS >6,000 kcal/kg >5,500 Kcal/KG (Mln Tonnes) WEEK TO
825-835 770-780 7.533 Feb 21
825-835 775-785 7.284 Feb 14
825-835 775-785 7.426 Feb 07
825-835 775-785 6.859 Jan 31
825-835 775-785 7.071 Jan 24
835-845 780-790 7.210 Jan 17
835-845 780-790 6.954 Jan 10
835-845 780-790 7.049 Jan 04
835-845 780-790 7.104 Dec 30
835-845 780-790 7.590 Dec 24
840-850 790-800 7.006 Dec 20
845-855 795-805 6.711 Dec 13
845-855 795-805 6.663 Dec 06
860-870 805-815 5.789 Nov 29
850-860 795-805 6.170 Nov 22
840-850 790-800 6.197 Nov 15
840-850 790-800 6.387 Nov 08
825-835 765-775 6.805 Nov 01
