SINGAPORE: China’s thermal coal prices hit their lowest levels in a year this week on rising inventories as domestic mine production is recovering faster than demand, analysts and traders said.

High inventories in the world’s top coal consumer are capping its appetite for imports, pressuring global prices.

The slow recovery in China’s coal consumption also points to a gradual rebound in power consumption and growth in the world’s second-biggest economy.

Analysts forecast China’s coal demand to grow 2% this year on resurgent industry and construction, and to bring extra appetite for imports, especially high-quality Australian coal after China partially eased a ban on imports from there.

However, rising stocks at ports and utilities suggest a faster resumption of output at mines than downstream industries such as steel, cement and chemical, can use, dampening market confidence in the near-term demand outlook.

Spot prices for thermal coal with heating value of 5,500 kilocalories (kcal) at northern Chinese ports plunged to 980 yuan ($142.49) a tonne this week, a level last seen in early February 2022.

Global thermal coal prices also slid, with Australian 5,500 kcal coal falling 10% to about $118 a tonne on the free-on-board (FOB) basis over the past two weeks, while Indonesian 3,800 kcal coal shed 17% to about $67 a tonne.

“Most coal miners have restarted production after the Lunar New Year holiday but downstream sectors are coming back slower with thin demand,” analyst Xiao Lanlan, from Tianfeng Futures, said in a note.

Coal stocks in eight northern ports climbed to 35.96 million tonnes this week, a level last seen in April 2020 when industrial activity halted due to COVID-19, China Coal Transport and Distribution Association (CCTD) data showed.

Reserves at major utilities are also higher than the same time in the past four years, but coal use at the power plants, appears to have climbed to the same level as last year, data showed.

The market for construction materials is also awaiting sustained economic stimulus from the government to underpin the infrastructure and property sectors, analysts and coal traders said.

“We were hoping for a strong rebound in demand along with a rapid economic recovery after the Lunar New Year but it seems the recovery path is much slower than we anticipated,” said a coal purchasing manager at a state utility who declined to be identified as he is not authorised to talk to media.


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