China Coal-Prices flat, expected lower in coming weeks

Fri, Feb18, 2011

* Prices flat on sluggish demand, ample stocks

* Traders expect prices to edge lower as supplies improve

* Chinese producers still selling spot cargoes overseas

By Fayen Wong

SHANGHAI, Feb 18 (Reuters) - China's thermal coal prices were stuck at 780 yuan ($118.5) for a fourth week, with traders and buyers expecting prices to fall in coming weeks as heating demand slackens and supply improves.

China's steam coal prices began a downward trend in early December and have shed around 22 yuan per tonne since its 2010 peak struck in November.

Coal with a heating value of 5,500 kcal/kg stood at 775-785 ($118.50-$119.68) on Friday, while inventories at top coal port Qinhuangdao were down about 2 percent at 7.28 million tonnes from a week ago, data from industry website sxcoal.com showed.

"There is more supply coming into the market because rail transport is improving on the back of warmer weather," said a coal trader based in Guangzhou. "The general market sentiment seems to be that prices could start moving lower as we enter a seasonal demand low."

A second trader said talks that some carriages on the coal rail network would soon be changed to those with 80 tonnes, from the current 70 tonnes, were also damping market sentiment as that means supplies from northern provinces would significantly increase.

Despite stronger demand during winter months, Chinese coal prices have struggled to move higher, even as sea ice in Bohai slowed imports earlier this month and as international prices spiked.

Domestic traders also blamed soft prices on Beijing's determination to control inflation, as price pressures on goods, excluding food, were at their highest in at least a decade. [ID:nTOE71E06O]

"With inflation the No. 1 focus, the government will continue to keep spot coal prices in check and that doesn't bode well for the market," said a Chinese coal trader.

On imports, Chinese buyers said Australian and South African coal was uncompetitive at current levels and would not price into the domestic market. Although they have been scouting for sub-bituminous material from Indonesia, offer prices were at best just 10 yuan lower than Qinhuangdao rates, giving them little incentive to import.

Analysts and some traders have said the steep discount for Chinese versus international thermal coal prices could persist through the first half of the year, as global values are bolstered by rain-led output disruptions and Chinese demand enters a seasonal lull. [ID:nTOE70J05M]

Australia's thermal coal prices, a benchmark for Asia, climbed above $126 per tonne as news of a force majeure at Xstrata's (XTA.L: Quote) Ulan mine in New South Wales boosted prices. [COAL/ASIA]

With Chinese domestic prices trading at a discount to Australian rates, overseas traders said Chinese producers were still actively offering cargoes to Japanese buyers and were also expected to kick off annual price negotiations with South Korean utilities soon.

Weekly Qinhuangdao prices for (Yuan) PORT STOCKS >6,000 kcal/kg >5,500 Kcal/KG (Mln Tonnes) WEEK TO

825-835 775-785 7.284 Feb 14, 201

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 ($1=6.610 Yuan)

(Editing by Chris Lewis, Sourced:Reuters)

Tags:demand, supply, raw material, spot cargoes overseas,downward trend,inventories, Qinhuangdao coal port,market analysts,coal traders,weekly Qinhuangdao prices for port stocks in Yuan