Downstream demand has continued to recover in China's domestic thermal coal market, but prices have yet to rebound accordingly, sources said this week.
Some Chinese power plants that are rebuilding their coal stocks have opted to buy a few low-CV cargoes to blend with their existing high-CV and high-sulfur coal, a Fujian-based trader said.
He added that a local power plant earlier this month bought a spot cargo of 5,800 kcal/kg NAR US coal with 1.8% sulfur at $80/mt CFR and now needs low-CV, low-sulfur coal for blending.
A Shandong-based trader is also looking for some low-CV Indonesian cargoes for one of his utility customers. The utility customer is ready to buy 3,800 kcal/kg NAR Indonesian coal at about $46/mt CFR, but offer prices for this Indonesian material are at least $39/mt FOB, or $48-49/mt CFR on a geared Handymax. This type of vessel has loading-discharging equipment fitted on board.
High-CV thermal coal has not been faring well in China's imported market.
"Downstream power plants have become more active in purchasing, but their purchase prices are still low," a Guangdong-based trader said.
A Shanghai-based trader is offering a Capesize cargo of 5,500 kcal/kg NAR South African coal to Chinese buyers at $83.50/mt CFR, but buying interest has been no higher than $82/mt CFR.
By comparison, Chinese 5,500 kcal/kg NAR domestic coal is currently sold at Yuan 610-620/mt (ex northern sea ports, including 17% VAT, but without port service fees of Yuan 25-30/mt), up about Yuan 10 a week ago. Prices of Yuan 610-620/mt translate to landed prices of about $82.40-83.70/mt CFR for imported material.
Some power plants in eastern China are purchasing 5,500 kcal/kg NAR domestic coal at Yuan 650-660/mt (delivered to major ports along the Yangtze River).
Prices of Yuan 650-660/mt translate into landed prices of about $87.80-89.10/mt CFR for imported material delivered to the river ports on geared Handymax vessels.
LONG-TERM CONTRACTS
A source at a Shanxi-based coal mining and trading company said that his company had recently resumed its long-term contracts with overseas suppliers although volume was limited.
"We do not want to foul our good relationships with overseas coal miners," he said.
However, original contract prices will have to be renegotiated, he noted, adding that his company is considering paying $1-2/mt higher than current average market prices for its overdue contracted cargoes of 4,700 kcal/kg NAR Indonesian coal.
A big Guangdong-based trading house has also restarted taking its overdue contracted cargoes of 4,000-5,000 kcal/kg NAR coal from its Indonesian suppliers, according to a source at the company.
NO OUTPUT CUTS
In a bid to boost coal mine safety, several provinces, including Jilin Province in northeastern China, Sichuan Province in southwestern China, and Shandong Province in eastern China, have recently issued notices to suspend coal production at smaller mines until the end of October.
Chinese coal mines will undergo much stricter safety check-ups across the country prior to the CPC conference which will be held in October. The conference usually results in suspension of production at small mines just in case of any safety mishaps, market sources noted.
Big coal miners, including China National Coal Group, however, are not prepared to cut their output.
At a seminar held by the State-owned Assets Supervision and Administration Commission on Tuesday, Zhou Dongzhou, board secretary of China National Coal Group, told local media that his company has no plans to cut output.
Instead, China National Coal Group plans to increase its annual coal output in 2012 by 5% year-on-year. The coal miner produced 85.90 million mt of crude coal in the first half of 2012, up 1.29 million mt, or 1.5%, year-on-year.
Shenhua Group, another big coal miner in China, also plans to achieve a 4-5% year-on-year increase in coal output in 2012.
In the first half of 2012, Shenhua Group mined 230 million mt of crude coal, up 29.68 million mt, or 15.2%, year-on-year.
