Prices in China's domestic thermal coal market slumped dramatically in Monday's Asian trading session as the effect of Shenhua's cut to its thermal coal prices late last week and depressed buying interest among Chinese power plants took a heavy toll on the market, said sources.
Shenhua slashed its price to contract customers for its 5,500 kcal/kg NAR thermal coal to Yuan 495/mt FOB Qinhuangdao including 17% VAT, and this has unleashed a wave of bearish sentiment that has flooded the domestic coal market.
Over the weekend and into Monday, Chinese power plants and traders continued to lower their buying prices for spot cargoes of domestic coal at China's northern ports including Qinhuangdao.
Bids for 5,500 kcal/kg NAR Shanxi coal fell to Yuan 480/mt FOB for offers at Yuan 485-490/mt FOB, and for lower grade 5,000 kcal/kg NAR product trades occurred at Yuan 422-425/mt, said market sources in China.
"I have never seen a [trading] year as awful as this one, and I predict we will not see any recovery this year," said one Chinese trader in Beijing.
A Hebei-based trader said an offer at Yuan 430/mt for 5,000 kcal/kg NAR domestic coal attracted barely any buying interest, and added that low-priced domestic thermal coal was barring Indonesian thermal coal from the Chinese market.
"Indonesian miners are eager to sell their cargoes now," a Singapore-based trader said. "But there are few Chinese buyers in the market for Indonesian thermal coal."
PLANTS SEEK TO DELAY IMPORTS
Some Chinese power plants are now trying to delay delivery of July arrival imported thermal coal cargoes until September, a Shanxi-based trader said.
The seaborne South China market has yet to fully adjust to the latest steep falls in domestic market prices.
A large gap remains between bid and offer prices for seaborne cargoes, said a Singapore-based source for a large mining company, adding that sentiment in the Chinese market remained weak.
"All you need is a few stabilizing announcements," the source said, adding that China was trying to restrain its coal production.
Bidding interest for August-delivery Capesize cargoes of 5,500 kcal/kg NAR Australian thermal coal appeared to steady Monday at $66/mt CFR to selling interest around $67/mt, said market sources.
"I got a bid for late-August delivery 5,500 kcal/kg NAR Australian thermal coal at $67/mt CFR but the price is still not workable with us," a Liaoning-based trader said.
Australian thermal coal with high ash was heard offered to Indian buyers at $58/mt FOB for loading in August to interest at $56-57/mt, and Indonesian 5,500 kcal/kg NAR remained priced out of China with offers heard at $65/mt FOB for this origin.
"We are traders, instead of producers, if there's no profit, there's no necessity for us to do any trades," said the trader in Beijing.
At the close of Asia trade, the Platts/Fenwei China Coal Index (CCI 1) for domestic thermal coal traded at Qinhuangdao port was assessed at Yuan 485/mt inclusive of VAT, and was down Yuan 6.50 from Friday.
The CFR South China (CCI 8) price was assessed at $66.50/mt basis 5,500 kcal/kg NAR, excluding Chinese VAT, and was 50 cents lower than Friday's assessment.
Platts assessed the FOB price of Newcastle 5,500 kcal/kg NAR thermal coal with typical ash of 20% at $58/mt, and down 25 cents from Friday.
