Asia pacific coal prices have eased amid swelling Chinese inventories and pressure on miners in the world’s biggest coal consumer to bring down the cost of domestic supply, analysts said on Thursday.
Global Coal’s Newcastle index has reversed early signs of a recovery to slide almost 1% on the week to USD 80.17/t.
The Pacific basin’s benchmark for high grade (6,000 kcal/kg) Australian coal deliveries to Asia has fallen for six consecutive weeks and stands 20% below where it began the year.
It is now within USD 2/t of this year’s trough, which was its lowest in two years.
Analysts at ANZ bank highlighted pressure from news that Chinese mines that have been hampered by safety inspections would resume production.
China’s National Development and Reform Commission has proposed miners reduce the cost of domestic coal below CNY 600/t to help utilities ensure they can curb industrial power prices by 10% this year in line with government aims.
Coal prices on China’s Zhengzhou exchange were down 2% on the week at CNY 581.60/t (USD 84.11/t) as they continued to pull away from mid-April’s highs above CNY 620/t.
Elevated Chinese stocks
Yet the market was responding at least as much to abundant stocks as to official pressure, said Zeng Hao, an analyst for sxcoal.com.
Coal stocks among power plants on China’s coast have been expanding since March and last stood at 17.5m tonnes, around 3.5m tonnes higher than normal and more than 2m tonnes above last summer’s peak, he said.
“No matter what the NDRC says, actually the price would drop.”
A shipping analyst additionally pointed to the ongoing trade dispute between China and the United States, which has been slowing economic activity in the world’s biggest economies.
“Also, I think we should see much fewer Indian purchases now, with the Monsoon almost upon us,” he added.
Indian power plant stocks have contracted for their third consecutive week, declining roughly 3.5%. Inventories monitored by the country’s Central Electricity Authority last stood at 29.9m tonnes. This was enough to meet 17 days of power generation.
Newcastle export stocks fell by roughly 600,000 tonnes to 1.35m tonnes in the week through 26 May, according to port data. There were four vessels waiting to take delivery, up from two last week.
The Newcastle index has expanded its spread against other basins. It is up USD 3 on the week against Global Coal’s European benchmark at a premium of almost USD 26/t. It is also up more than USD 1 against South Africa’s Richard’s Bay price at a premium of almost USD 19/t.