Chinese domestic thermal coal prices have fallen further, fuelling speculation that some power utilities might be looking to walk away from existing contracts for imported material, sources said Monday.
"I have heard rumours maybe that some power plants in China are renegotiating or defaulting on some shipments. But that is just a rumour," a Singapore-based source said.
"If I had sold February arrivals [cargoes of 5,500 kcal/kg NAR imported coal] above $84/mt, I would be slightly panicking as I think the Chinese expect levels to get back down to about $79-80/mt CFR south China or maybe lower," he added.
Late last week, a Singapore-based trader said falling domestic prices could lead to some possible defaults by Chinese imported thermal coal buyers on existing contracts in the coming weeks.
Capesize cargoes of 5,500 kcal/kg NAR Australian coal were heard being offered at around Yuan 620/mt ($102.44/mt) FOB Qinhuangdao, according to a Shandong-based trader. "This is too high," he said.
Domestic 5,500 kcal/kg NAR domestic coal is tradable at around Yuan 610/mt FOB Bohai ports, about Yuan 10/mt lower on the week, the trader added.
"There is no reason for domestic coal prices to go back up. It's coming down to below Yuan 600/mt very soon," a Beijing-based trader said.
MORE DOWNSIDE
"I would expect domestic 5,500 kcal/kg NAR thermal coal to drop by about Yuan 20/mt to about Yuan 580-590/mt (or Yuan 496-504/mt without VAT) and then stabilize over the Lunar New Year holidays," a Liaoning-based trader said.
A Capesize cargo of either South African or Australian 5,500 kcal/kg NAR coal was being offered at $83.15/mt CFR south China for March arrival, but there were no immediate counter bids, the Singapore-based source said.
A Capesize, 150,000 mt cargo of either Australian or South African 5,500 kcal/kg NAR coal was being offered at $83.50/mt CFR south China for end-February arrival, while bids were coming in at $81.25/mt, as heard through broker Marex Spectron.
March-arrival, 150,000 mt Capesize cargoes of South African or Australian 5,500 kcal/kg NAR coal were being offered at $83.25/mt CFR south China while bids were at $81/mt, as heard through the same broker.
On a free-on-board basis, Capesize, 130,000 mt cargoes of Newcastle 5,500 kcal/kg NAR coal were being offered at $71.25/mt for loading in February, while bids were at $70/mt, as heard through Marex Spectron.
For March loading, an offer for a Capesize, 130,000 mt shipment of Australian 5,500 kcal/kg NAR coal was at $71.25/mt FOB versus a bid at $69.50/mt, as heard through the same broker.
At the close of Asia trade Monday, the Platts/Fenwei China Coal Index (CCI 1) for domestic thermal coal traded at Qinhuangdao port was assessed at Yuan 608/mt inclusive of VAT, down Yuan 7 from Friday's close.
Platts assessed the FOB Qinhuangdao 5,500 kcal/kg NAR coal for delivery in the next 7-45 days at Yuan 518/mt, down Yuan 7 on the day.
The CFR South China (CCI 8)price was assessed at $83/mt basis 5,500 kcal/kg NAR excluding Chinese VAT, down 60 cents on the day.
Platts price assessment for cargoes of 5,500 kcal/kg NAR coal for arrival in south China ports in the next 15-60 days was at $83.20/mt CFR, down 60 cents on the day.
Typical 20% ash Newcastle 5,500 kcal/kg NAR coal for loading in the next 7-45 days was assessed at $71/mt FOB, down 50 cents on the day.
RESALE CARGOES
Sources said more January-delivered cargoes of 5,500 kcal/kg NAR Australian and South African thermal coal were available for re-sale in the Chinese market.
A January-delivered mini-Capesize cargo of 5,500 kcal/kg NAR Australian thermal coal is offered at $84.50/mt CFR but bidding interest has now slipped below $84/mt CFR, sources said.
"Now that downstream utilities restocking has basically come to an end, we would not take any January-delivered cargoes," a second Shandong-based trader said.
Despite the bleak demand prospect in the near term, some Chinese buyers are planning to take some February- and March-delivered cargoes of 5,500 kcal/kg NAR Australian thermal coal at bargain prices.
A February-arrival mini-Capesize cargo of 5,500kcal/kg NAR Australian coal was heard offered at $84/mt CFR southern China, down from $85/mt a week ago, according to a second Beijing-based trader.
Expecting low demand from Chinese power plants in February, the trader was only willing to pay $83/mt CFR for the coal.
Another Capesize cargo of 5,500kcal/kg NAR Australian coal was being offered at $83/mt CFR southern or eastern China for February or March delivery, according to a Shanghai-based trader, but was yet to conclude a deal.
