Via Macquarie:
China’s domestic thermal coal price continued to rise into September in spite of slower demand from power plants. Spot prices for 5,500kcal coal in QHD are reported to be over Rmb670/t this week, up from Rmb 620/t in the end of August, and official quoted BSPI climbed from Rmb579/t to Rmb583/t over the same period. This unusual price hike seems to be driven by traders rather than end-users, given power plants’ coal inventories have been falling since early September while traders are moving coal from north China to south China, as shown by the rise in coal inventory in southern Chinese ports and the decline in coal stocks in northern ports. We learned that traders have been stockpiling coal to drive prices higher in anticipation that power plants will have to restock coal at some point before the winter, while power plants were planning to purchase coal after the price retreats (note). We think traders’ speculation has put the domestic coal market in a dangerous position that could either lead to a buyers’ strike or government intervention, and if coal prices fall we could see a rush to liquidate inventory from traders.
It’s pretty irrational stuff. Import bans should hammer the seaborne price…
