Asian coal resumes slide as Chinese stocks hit 5-year high

November 8, 2019, 7:40 pm | Admin

Asian coal prices declined 3% in the week through to Thursday as inventories for the world’s biggest coal consumer hit their highest level since 2014.

The Pacific basin’s reference price for high grade (6,000 kcal/kg) Australian coal exports to Asia last stood at USD 67.09/t, 33% below where it began 2019.

Global Coal’s Newcastle index fell by USD 1.82, while its spread with European coal narrowed to around USD 10/t amid rising prices into north-western Europe.

Chinese coastal power plant stocks monitored by analysis firm sxcoal have reached 97m tonnes, up 4% year on year.

“In early September it was just 80m – so we increased by 20m in two months,” said sxcoal analyst Zeng Hao.

Imports still high

So far this month, importers had faced little trouble clearing their volumes through customs, Zeng said.

He expected data for October to show the country was still importing about 10% more coal than last year.

Official statistics, due on Friday, would likely come in at 30m tonnes, he said – roughly in line with September’s volume and 5m tonnes higher than one shipping broker’s recent expectations.

This would effectively ensure utilities reach a 281m tonne goal for foreign purchases for 2019 two months early. Zeng only expected customs to curb imports markedly in December.

“Based on that, we think the influence [on international prices] would not be as big as last year.”

China slashed imports to 10m tonnes last December to attempt to comply with government curbs.

Beijing is balancing support for its domestic coal miners with a goal of keeping energy prices low.

This year’s collapse in international prices – which are significantly cheaper than domestic supply – has helped the latter objective, leading to another rise in imports.

Chinese demand flat

Yet that rise was being driven less by necessity than opportunity.

“This year Chinese demand is flat,” said Zeng.

China’s domestic coal production is up more than 5% so far this year at around 2.74bn tonnes.

As an ongoing trade dispute with the US weighs on industrial activity, the country’s cumulative coal supply is outpacing demand, with the balance winding up in inventories.

Coal prices on China’s Zhengzhou exchange continued to push out their lowest levels this year, falling another 2% over the past week to CNY 543/t (USD 77.39/t).

Elsewhere in Asia, Indian coal production was recovering in the wake of Monsoon damage that had supported a recent surge in imports into the world’s second-biggest consumer, said an analyst at a shipping broker.

“However, inventories have also been eaten into and for all Coal India’s efforts, they’re going to struggle to raise production to compensate.”

Indian power plant stocks rose 6% in the week through to Tuesday to 19.9m tonnes, according to the country’s Central Electricity Authority.

Also in in the past week, South Korea revealed it planned to bring forward six coal plant closures by one year to 2021 to address air pollution.

This is equivalent to 2.6 GW or 7% of installed capacity in the world’s third-largest hard coal importer.

Last modified on November 12, 2019, 7:50 pm | 710