China credit squeeze hits coal price

Saturday, 05 Nov 2011

According to producer and traders, Chinese private traders' struggle to open letters of credit during the past three weeks has been the primary cause of the 8% fall in coal prices seen since the start of October.

They said coal prices will not recover until China resumes buying in force. Thermal coal benchmark prices have lost nearly USD 10 a tonne since the start of October since China which had been almost single handedly absorbing the world surplus spot coal, stepped out of the market.

They said a similar pattern has developed in coking coal, iron ore and base metals buying.

Chinese coal importers often private companies who act as agents for a group of state utilities have continued to enquire for spot cargoes and have told suppliers they should be able to start buying again within a week or two.

China has been raising interest rates and banks' reserve requirement ratio to fight inflation. Premier Mr Wen Jiabao said on Tuesday it will remain the government's top priority.

Chinese importers said that a few of them have asked to delay shipments because of high stockpiles. The spot coal tonnage traded globally which drives the benchmark prices is a tiny portion of annual seaborne trade in excess of 750 million tonnes and but China buying this year of cargoes which had nowhere else to go has been a huge price influence without China, prices would have slipped a lot sooner.

China September coal imports were a record 19.1 million tonnes including over 900,000 tonnes from South Africa. October and November imports are expected to show a steep fall.

1. All imports hit

Mr Colin Hamilton Macquarie analyst said "Credit restrictions are affecting everything that is imported. He said that restrictions were more severe earlier in October but the situation is starting to ease now.”

He added that "The last couple of weeks have been tough for credit, they've really screwed it down banks are telling their clients they don't have enough cash for them to allow new LCs to be opened and without that, they can't buy, one major coal trader who supplies the Chinese market. It's starting to ease up now, but in another week or so we'll know if that is the case because buying will resume."

According to another supplier of large volumes to China importers want the coal and are mostly managing to open LCs just in time for shipment.

He said that "A month ago the were opening LCs 45 days prior to shipment and now its about 10 days prior quite tight timing but it's working and nobody's asked us to delay yet."

2. Shadow Banks Pressured

One major South African exporter said "This seems purely a credit issue, the shadow banks are having their wings clipped and people who are intermediaries for state end users need credit and at lease some of the coal bought and due to be shipped soon was financed by shadow banks."

He said that "Shadow banks lend at a higher rate of interest and then pass that on at an even higher rate and this sector is under pressure."

Companies which have been regular suppliers of South African, Colombian, Indonesian and Australian coal to China this year said the hiatus in Chinese buying did not seem to be a straight exercise to bring prices down before swooping in to buy on a large-scale.

One said "If they wanted to play price games then they'd say they couldn't open older LCs at higher prices but could open a new lower-priced LC and that's not happening."

However, the fall in prices which kicked in swiftly as soon as importers began to feel the credit squeeze is likely to be an accidental benefit for the importers.

Any cooling in Chinese commodity spot buying tends to give the suppliers who have grown to depend upon it a nasty shock but sellers are interpreting the current slowdown as temporary, citing steady enquiries for thermal, coking coal and iron ore.

Producers and traders said coking coal prices have also started to soften in the past month but the outlook is positive.

A UK based coking coal physical trader said "When the market sentiment changes coking coal will be one of the first commodities to see a strong price increase coking coal is in very short supply."

A European steel derivatives trader said "I don't think coking coal prices are going to have the same drop as iron ore prices did, I think that train has run its course."

(sourced from Vancouversun)

China Bohai Thermal coal prices hit all time high

Friday, 04 Nov 2011

It is reported that the latest Bohai-Rim Steam-Coal Price Index or BSPI indicates that the average price of thermal coal with calorific value of 5500 kilocalories per kilogram reached an all-time high of CNY 853 per tonne in the week ending October 26.

The price was up CNY 6 per tonne or 0.71%t from a week earlier and an increase of CNY 28 per tonne compared with September 7 when a rebound was seen after nine consecutive weeks’ fall.

At Qinhuangdao port, the price of 5500 kilocalories per kilogram and 5800 kilocalories per kilogram thermal coal was up CNY 5 per tonne to CNY 850 per tonne to CNY 860 per tonne and CNY 900 per tonne to CNY 910 per tonne respectively compared with the previous week while that of 4500 kilocalories per kilogram and 5000 kilocalories per kilogram thermal coal kept stable at CNY 650 per tonne to CNY 660 per tonne and CNY 745 per tonne to CNY 755 per tonne.

In China's main coal-producing regions, such as Shanxi and Inner Mongolia, coal prices have remained stable after previous weeks upswing. Coal prices in these two regions have perched high for several weeks on speculation that China may face another round of power shortage in the coming winter. And the tough coal transport capacity may be one of the main reasons to bolster up the price.

(source: steelhome.cn/en)

Rising Coal Prices to worsen China's winter power crunt- CRI English

Sat, 29 October 11

CRI English reported that, the rising price of coal is fueling concerns about a power crunch set to plague China this winter, analysts said.

The rising price of coal is fueling concerns about a power crunch set to plague China this winter, analysts said.

A 26-million-kilowatt power shortage is expected during peak periods in the coming winter and spring, said Tan Rongyao, chief supervisor of the State Electricity Regulatory Commission.

The power squeeze situation will be grim, especially in Guangxi Zhuang autonomous region and the provinces of Guangdong, Guizhou, Yunnan and Hunan, Tan said.

The country's recent moves to support small and medium-sized enterprises will increase power demands because of resumed production, which will then push up demand for coal, said Xing Lei, a professor at the Institute of China Coal Economy of the Beijing-based Central University of Finance and Economics.

The continuing rises in coal prices and the supply shortage will make the situation even worse as coal is China's cornerstone of power generation, analysts said. About four-fifths of China's electricity comes from thermal power plants.

However, the current coal output is not enough to support the growing appetite for power in the world's second largest economy, and the supply strain may worsen in the future, said Zhang Lizi, principal assistant of North China Electric Power University.

Power shortages have been a persistent headache for China. In 2008, many southern provinces were hit by the worst power crunch in five years, with these regions' power-generating capacity going underutilized due to the coal shortage and soaring prices.

Li Chaolin, an industry analyst, expects the country's coal prices to hit the highest level since 2008 in the coming winter because of the supply shortage.

By Oct. 26, the average price of thermal coal rose 14 percent from a year earlier to a record high of 853 yuan (134.33 U.S. dollars) per tonne following eight consecutive weeks of increases, according to the Bohai Rim Steam Coal Price Index, China's government-run coal price gauge.

The expectation of a coal supply shortage and surging demand will further push up prices, Zhang said.

"The vicious circle, if left unchecked, will hurt the country's economic development," she said.

Meanwhile, higher coal prices increase power generators' financial pressures, making them reluctant to boost production because of the widening gap between the government-set electricity price and the market-oriented coal price, Li said.

Analysts have long called for a reform in the mechanism distortion, which they cite as the major reason for repeated power crunches in the country.

Zhang also advised the government to promote energy-efficiency and industrial structure readjustment to ease power demand growth while boosting supplies by stepping up coal imports.

As the world's largest coal consumer, China consumed 2.28 billion tonnes of coal in the first nine months of this year, up 10.3 percent year-on-year.

It has become a net importer of coal in the first nine months, with a net import of 111 million tonnes. In September alone, the country imported 19.12 million tonnes of coal, up 25.1 percent year-on-year.

Source: CRI English via coalspot

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China thermal coal price may rise further

Tue, Oct04, 2011

It is reported that after dropping for about two months, thermal coal price along China coastal areas had rebounded since late August, thanks mainly to active buying from end users. And the price is likely gain further strength for the following supportive factors.

1. Supply from coal-rich Shanxi province is predicted to be affected by the deadly accident on September 16 at a mine in Shuozhou which belongs to China National Coal Group. The provincial government ordered all underground mines of China Coal in Shanxi to stop production before passing the inspection. From sources available to CCR and our own data base and we believe that the impact to supply which will be primarily thermal coal is about 6 million tonnes to 8 million tonnes.

2. Daqin, China top coal dedicated rail line would kick off a 12 day maintenance starting from Sep 20, causing a direct impact on coal delivery to northern ports. Inbound coal transport to Qinhuangdao is estimated to drop by 100,000 tonnes each day during the maintenance period. Given by that, coal stocks at port may follow a downward track if the outbound shipment remains high.

3. Coal inventories at ports have fallen even before the maintenance starts. Despite efforts made by relevant departments to increase rail supply, coal stockpiled at northern ports has been on the decrease since the beginning of Sep due to high shipment amid active buying from downstream sectors. Data showed, Qinhuangdao held 7.07 million tonnes of coal in stock as of September 19 down 230,000 tonnes from month beginning. When the maintenance starts, ports would likely see a swift fall in coal stocks as shipment is expected to keep high for a while.

4. Total demand for coal may remain robust as backed by high production in most energy-guzzling sectors. In addition, China PMI increased by 0.2% from one month before to 50.9% for August the first rise in four months indicating a stable economic performance for the time being. Under this scenario, coal demand in China is expected to stay strong in the near term.

5. Hydro conditions have not yet improved notably in the southwest. Therefore, thermal power generation still faces huge pressure to make up the shortfall in electricity supply.

6. Coal imports by China may be somewhat impacted by the recent rise in global coal price. Thermal coal prices at Australia Newcastle port a benchmark for Asian coal prices rose for four straight weeks in the period from August 12 to September 9 jumping USD 4.58 per tonne or 3.82%.

Given by that, some coal demand may turn to seek domestic sources.

(sourced from sxcoal)

China Coal Prices Face ‘Upward Pressure,’ UOB-Kay Hian Says

Tue,Aug 16, 2011 |By Bloomberg

China’s thermal coal prices face “upward pressure” and may rebound earlier than expected after stockpiles at ports and power stations declined, UOB-Kay Hian Ltd. said.

Demand for domestic coal was reflected in rising freight rates to deliver the fuel from Qinhuangdao port to Shanghai or Guangzhou, Helen Lau, a Hong Kong-based analyst at UOB-Kay Hian, said in an e-mailed note today. Freight costs climbed as much as 3 percent for the week ended Aug. 10 from a week earlier, reversing a downtrend since June, she said.

China’s thermal coal prices typically fall during July through September after power plants complete stockpiling the fuel to meet summer demand. Last year, prices began to rebound in late September as utilities replenished inventories consumed during the peak season, according to data from the Beijing-based China Coal Transport and Distribution Association.

Inventories at the top six Chinese power generation companies have fallen to the equivalent of 15 days of consumption after staying above 17 days since June, Lau said in today’s note. Inventories below 15 days represent supply tightness, she said.

Daily coal consumption at power plants rose to a record in July as electricity demand expanded 12 percent from a year earlier, Cai Hongyu, a Hong Kong-based analyst at China International Capital Corp., the nation’s biggest investment bank, said in a separate e-mailed note today.

China’s thermal coal prices should rebound in September as utilities restock and maintenance begins at Daqin railway, a major coal transportation rail-line, Cai wrote.

3 factors contribute to coal monopoly and prices hike in China

Tuesday, 16 Aug 2011

It is reported that the high hovered thermal coal prices has been down for its sixth week and experts say the intensive monopoly of coal industry may pull up prices later August and lead to a new round of coal shortage next year.

1. Price Hike around the Corner

By August 11, BSPI is reported to continue declining for another week. 5,500 kilocalories per kilogram thermal coal price at Bohai Rim close at CNY 829 per tonne off CNY 2 per tonne from that in the previous week down for the sixth week in a row and the cumulative decline touches CNY 14 per tonne.

An expert from China Guodian Corporation notes that a few yuan fall will do no good to the cost of power plants. Once the coal price picks up, it will undergo a drastic rise of tens of hundreds yuan and will not retreat back. So the so called decrease is almost meaningless towards power plants.

More analysts reckon that despite the current retreat, coal prices this month is expected to stabilize and soar. By the end of summer peak, power plant all over the country, holding a strong bullish forecast for coal price, will stock as much as possible, which will further push up the price.

Mr Huang Teng from China Coal Group predicts that coal prices will rise on about 20th of this month following up by a dramatic increase.

2. Coal Monopoly Bolsters Prices

Mr Huang analyzes that one supporter of coal prices comes from the government administrative monopoly. Since the Central Government endows local governments with the managing right of large coal mines the latter controls the mining rights and becomes beneficiary of China coal.

And the conglomerates, represented by large coal enterprises after integration in Shanxi, Inner Mongolia also drag up prices by controlling the output, launching commercial monopoly. He said that “In terms of thermal coal, China Coal, Shenhua Group and the Cosmos can completely control domestic thermal coal prices."

Finally the monopoly of railway transportation is also the bottleneck of power plants. Huang said that China's tight rail transport could only feed half of the brisk freight demand. As a result China's coal supply does not depend on how much coal can be produced but how much coal can be shipped.

Meanwhile, international coal prices continue to rise as a result of greatly increased demand for domestic coal, domestic coal transportation monopoly will further boost the role of the show.

3. New Round of Coal Shortage

Mr Huang also points out that the price gap between foreign and domestic coal drives China imports about 150 million tonnes of coal annually. As per NBS national coal output in 2010 is seen at 3.24 billion tonnes, which is sufficient to meet domestic demand whereas the spread still pushes China to import more. This will boost international coal prices and curb imports, and finally end-users will turn to domestic coal.

On the other hand, coal imports will be curtailed in pace with the recovery of international especially Japan economy. Coal prices may hike by 15% by these two factors, thus coal shortage will be inevitable next year.

(Sourced from MySteel.net)
visit www.Mysteel.net for real time access to China steel news

China’s Thermal-Coal Prices Fall for First Time in 5 Months

Monday,Jul 18, 2011

China’s benchmark thermal-coal price fell for the first time in almost five months after power stations built up inventories of the fuel for the summer.

Coal with an energy value of 5,500 kilocalories per kilogram at Qinhuangdao port declined 0.9 percent to 840 yuan ($130) to 850 yuan a metric ton as of today compared with a week earlier, according to data published on the website of Beijing- based China Coal Transport and Distribution Association. That’s the first decline since Feb. 28.

China’s power plants typically complete fuel stockpiling before peak summer demand in July through September. Inventories at major power plants increased 7.6 million tons from a year earlier to 65.4 million tons at the end of June, equivalent to 18 days of consumption, the National Development and Reform Commission said in a statement on its website today.

Industrial production in June exceeded forecasts by economists, helping support coal prices because of electricity demand from factories.

Coal stockpiles at Qinhuangdao, which ships half the nation’s seaborne coal, fell 2.6 percent to 7.08 million tons, the second straight week of decline, according to today’s data. (By Bloomberg )

China urges more coal imports to keep lights on

Jun 2, 2011 |en.sxcoal.com

China will encourage coal imports and urge miners to boost output to increase supplies to power plants, in a bid to ease the short supplies of fuels, China's economic planning agency said on June 1.

In the first four months, the price of international crude oil kept rising, and that of the imported coal was 100 yuan/t higher than that in domestic market, which crimped the country’s coal imports, the National Development and Reform Commission (NDRC) said.

The nation would take comprehensive measures to increase energy supplies and curb unreasonable demand, according to the NDRC.

The power crisis has been compounded by a drought in central China which is threatening to slash hydropower output, China's largest power source after coal.

Eleven out of China's 31 provinces and regions have introduced power use restrictions since May, the commission said in a report on its website (www.ndrc.gov.cn).

But it ordered grid firms to ensure power supplies to households and other important power users.

Asia Coal-China demand in focus as power shortages loom

Thu Jun 2, 2011 10:35am GMT

By Rebekah Kebede

PERTH, June 2 (Reuters) - Asia's thermal coal markets were focused on Chinese demand as the world's largest coal consumer faces what is expected to be the worst power shortage in years.

Chinese buyers have been in the market for both Indonesian and Australian coal as domestic prices in the world's largest coal producing country have shot up.

But Australia's thermal coal prices, a benchmark for Asia, were still slightly lower on the week with the globalCOAL Newcastle index closing at $118.86 on Wednesday, a dollar down from a week ago.

China's daily prices for coal with a heating value of 5,500 kcal/kg NAR were 845 yuan ($130.43) per tonne on Thursday, according to industry data website SXCOAL (www.sxcoal.com).

"Because everybody else has secured their requirements right now, everybody is focused on what incremental prices China is willing to pay for lower-calorific Indonesian and the tailings and washings out of Australia," one Singapore-based source said, referring to Newcastle coal which does not meet the standard export specifications.

China said on Wednesday that it would encourage imports, which typically only enter the country when China's domestic coal prices are high enough to make economic sense.

Chinese demand for Indonesian coal, however, was seen slightly lower during the past week.

"They have bought quite enough low-grade coal from Indonesia- now they are trying to find some higher-grade coal to blend. Australia is the most economical source," another Singapore-based market source said.

Most recently, Chinese buyers secured a cargo of 4,900 kcal/kg Indonesian coal for $89 per tonne FOB, a couple of dollars cheaper than deals done late last week, the source said.

WEEK AHEAD

Japan's coal demand outlook will also be in focus, with Xstrata , the world's largest exporter of thermal coal, visiting Japan next week to negotiate an annual supply contract beginning July 1.

Although the supply contract beginning in July is for far less tonnage than the April contract, which serves as a yearly price benchmark, the negotiations may provide an indication for how well utilities are recovering from the March 11 earthquake.

Major utilities Tokyo Electric Power and Tohoku Electric were forced to declare force majeure on some coal shipments after some power plants were knocked offline due to the earthquake and tsunami.

A Sydney-based trader said the settlement price for the July contract may be similar to April's price of $129.85 per tonne, but others disagreed, saying lower demand due to the Japanese earthquake would depress prices.

"I wouldn't be surprised if they settle at $125 per tonne," one trade source said. ($1 = 6.479 Chinese Renminbis) (Editing by Himani Sarkar, sourced Thomson Reuters)

China May Double Thermal Coal Imports by 2015, Noble Says

May 30, 2011 1:34 PM GMT+0530
By Dinakar Sethuraman and Yoga Rusmana

China may more than double thermal coal imports to 200 million metric tons by 2015 from 90 million last year, said Neil Dhar, executive vice president at Noble Group. Imports this year may be unchanged from 2010, he said.

India’s overseas purchases of the power-station fuel may increase to 67 million tons this year and 100 million by 2015, from 58 million in 2010, Dhar said at the Coaltrans Asia conference in Bali today. China’s domestic consumption will be 3.5 billion tons and India may use 1 billion tons by 2015.

Australia and Indonesia will mainly supply China and India and additional volumes may come from the U.S. west coast and South Africa, Singapore-based Dhar said. The industry is witnessing cost pressures, which will keep prices high, he said, declining to give details.
(sourced Bloomberg)

China Coal-Prices stay at 4-mth low; seen weak til May

Mar03, 2011

* Market well-supplied
* Chinese coal discount vs Australian imports highest since '08
By Fayen Wong

SHANGHAI - China's thermal coal prices were stuck at a four-month low of 770 yuan ($117.2) a tonne as supplies continued to outstrip demand, with stockpiles at Qinhuangdao port rising to the highest in more than seven months.

Some Chinese traders remained bearish on the market and voiced concerns that demand would only pick up in late April or May ahead of summer restocking by utilities.

Coal with a heating value of 5,500 kcal/kg was flat at 770-780 ($117.19-$118.72) on Wednesday, while stocks at top coal port Qinhuangdao jumped 12.5 percent to 8.47 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.

"Prices won't start moving higher until around May. The outlook for imports will probably only improve ahead of summer, but even that is highly dependent on international prices," said a source at a big trading house.

"We have to remember that China doesn't need to import. They have more than enough coal domestically to feed the entire nation. They only do it when imports are cheaper."

But coal prices in Australia and South Africa have continued to rise in recent weeks, making Chinese coal cheaper by $38 and $9.30 a tonne respectively, based on coal with heating value of 6,000 kcal/kg NAR, Reuters calculations showed.

The arbitrage between Chinese coal prices and Australian imports are at the widest since September 2008.

"The floodgates of Chinese demand closed as suddenly as they had opened in 2009. You get the occasional enquiry but they are just fishing; none of them are serious buyers," said a Singapore-based trader.

Another trader said Chinese buyers were offering some $5-$10 below market rates for Indonesian sub-bituminous coal, which is now hovering at around $87 a tonne, based on coal with a net heating value of 4,900 kcal/kg.

Lured by higher overseas prices, Chinese producers are still trying to sell spot shipments to Japan, but there is a general lack of buying interest in Japan and the Pacific market as whole.

Australia's thermal coal prices, a benchmark for Asia, slipped to $132 a tonne versus last week in a thinly traded market which is largely awaiting the results of annual contract negotiations between Australian producers and Japanese utilities.
[COAL/ASIA]
Weekly Qinhuangdao prices for (Yuan) PORT STOCKS >6,000 kcal/kg >5,500 Kcal/KG (Mln Tonnes) WEEK TO

825-835 770-780 8.472 Mar 02

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

(Reporting by Fayen Wong, Editing by Jonathan Hopfner, By Thomson Reuters)