Chinese traders are selling their coal at losses or trying to delay imports after the government’s interventions prompted a steep price decline, market participants said. The National Development and Reform Commission ordered domestic miners to cut prices to a set target and boost production to cool down overheated prices.
The intervention has prompted a 50% plunge in China’s thermal coal futures, which steadied around CNY900 ($141) per ton last week. Prices of Indonesian thermal coal with an energy content of 3,800 kilocalories stood at $100 per ton on a free-on-board basis for November and $88 for December, compared to $160 in late October.
As a result, coal traders are saddled with unprofitable supplies. As domestic prices fall, Importers are scrambling to sell on the coal shipments they booked at record prices last month. Some traders said they suffered losses of between $40 to $100 per ton. Meanwhile, some coal buyers walked away from contracts, while some others tried to delay incoming shipments.
Beijing’s market intervention is also expected to slow down coal imports in November and December after already declining in October. China imports 20 million to 30 million tons of coal every month, but the arrivals are expected to fall to around 16.3 million tons in November following the intervention. That would represent a 26% drop from October.
