China’s maritime thermal coal demand set to rebound on summer storage, railway maintenance

Demand for China’s maritime coal is expected to increase in the near term as domestic buyers seek supplies ahead of the summer and railway maintenance is expected to hamper the supply chain in April, sources said. market at S&P Global Commodity Insights.

Expectations for an increase in thermal coal demand come at a time when domestic production has been affected by COVID-induced lockdowns and movement restrictions. More than 20 provinces and cities imposed travel bans and closures as the number of positive cases rose.
Sources said maintenance of the railway line, which was due to start on April 8, could affect supplies to Qinhuangdao Port during the month. Therefore, buyers want to stock up before maintenance begins.

The maintenance announcement comes around the same time buyers traditionally look to increase inventory ahead of the summer, when demand for cooling increases, sources said.

“Summer is coming soon, so stocks would be needed, and if they don’t have enough domestic coal production, that demand should come to the import market,” said an Indonesian producer.

Market sources said the increase in COVID-19 cases and the restrictions in place to contain the spread have affected production capacity, with restrictions imposed on the number of workers allowed at mine sites and the increase testing delaying transportation and other logistics.

The price of Indonesian GAR of 4,200 kcal/kg rose to $108.05/tonne FOB on March 23 from $65.45/tonne FOB on January 3, according to data from S&P Global.

While the period was marked by firm demand from buyers in Japan and South Korea, as well as Europe, amid gas supply disruptions following Russia’s invasion of Ukraine , China opted to stay out of the market, waiting for prices to fall.

Spot offers for Qinhuangdao 5,500 kcal/kg NAR were at 1,700 Yuan/mt [$266.65/mt] March 23, sources say.

China’s top economic body, the National Development and Reform Commission, said it believed the stable price was 770 yuan/ton. However, production levels so far have not been able to meet the requirements to meet that price cap forecast, sources said.

China produced 690 million tonnes of coal between January and February, up about 10% year on year, according to data from the National Bureau of Statistics. The country imported 35.39 million tonnes over the same period, down 14% over the year.

A South Korea-based source said city closures and lower factory output in China could be a factor in lower demand, but buyers may want to stock up ahead of roadline repairs of iron.
Source: Platts