Chinese coal prices.
We don’t know too much about them, but we understand it’s probably a good time to learn. As Bloomberg reported on Monday:
March 1 (Bloomberg) — Coal prices at Qinhuangdao, a benchmark in China, fell for a fourth week as winter demand and port closures last week increased stockpiles.
Prices for coal with an energy value of 5,500 kilocalories per kilogram dropped to between 700 yuan ($103) and 710 yuan a metric ton today, down 2.8 percent from a week earlier, data from the China Coal Transport & Distribution Association showed.
China has emerged from its coldest winter in at least 50 years, where snowstorms and sea ice in the three months through January had disrupted coal deliveries amid a surge in heating demand. Qinhuangdao coal prices increased 42 percent as of end- January compared with six months earlier.
And here’s the turnaround in chart form:
The reason this is interesting is because coal-price related news in China has until recently been anything but bearish. The above chart therefore represents a significant change in sentiment.
It also shows to what extent the coal price drop off in 2008 pre-empted the global financial crisis, and has since echoed the path of WTI crude prices.
Seasonal trends will no doubt be playing a part, but it’s worth watching in case there’s more to it than just weather.
We note that back in 2008 prices collapsed after port coal stocks in Qinhuangdao grew markedly to record levels of 8.8m tonnes. According to a report on industry portal SteelOrbis, a similar inventory surge might now be taking shape again. As the group reported on Wednesday last week:
Coal inventory at Chinese ports has surged recently. From February 9 to February 23, inventory at the northeastern port of Qinhuangdao rose from 5,460,000 mt to 6,975,000 mt while inventory at Guangzhou port in the south saw almost exactly the same increase. Meanwhile, as stated by Wang Lifeng, general manager of the Qinhuangdao Ocean Shipping Coal Transaction Market, current coal prices continue to point in a downward direction.
Mr. Wang said that the domestic coal market in China has now witnessed a big change as regards the demand and supply situation. The shortages previously witnessed in coal supply now no longer exist and there is at present a saturation of supply especially in the central and eastern regions of China.
With factories shut down, and the weather getting warmer and warmer, consumption of electricity and of coal decreased during the Chinese New Year holiday. Coal consumption has now entered its low season. Coal prices have continued to slide down due to high inventories at power generation plants and due to the increase of coal inventories at the ports.
Related links:
Could China fall out of love with coal? - FT Energy Source
The death of US coal - FT Energy Source
Chinese bubbles, ghost towns edition – FT Alphaville