12 Feb 2020

Chinese Coal Traders Hunt for Short-Term Buys Amid Virus Disruption

12 Feb 2020  by Reuters   
Chinese coal traders and small coal-fired utilities are scrambling to lock in supplies of fuel from miners, worried about the prospects of market tightness as downstream users return to work after an extended national holiday.
China added a week to its Lunar New Year holiday as it battles to rein in a coronavirus epidemic that has killed 1,016 and infected more than 42,000 nationwide.
Coal consumption is expected to pick up as work resumes at factories such as cement makers and chemical plants but the market worries increasing downstream demand will outstrip the pace of recovery in production by coal mines.
Medium- and small-sized coal-fired utilities not bound by long-term contracts with coal mines are scrambling for spot market purchases, as concern grows about supply in coming weeks, according to analysts and four coal traders.
"In the short term, demand is poor but supply is worse," said Rodrigo Echeverri, head of research at Noble Group in Singapore, though he added that the shortage of thermal coal in China was likely to be very short-lived.
"We have seen a lot of demand for prompt shipments due in March, but not for April."
Benchmark thermal coal with energy content of 5,500 kilocalories a kg in China stood at 576 yuan ($82.56) per tonne on Tuesday, its highest since mid-October.
Production has resumed at 57.8% of coal mines, a senior official of economic planner the National Development and Reform Commission (NDRC) told a news briefing, but did not say how much capacity this represented.
Authorities will work with regional officials to resolve problems from lack of workers to transport disruption, and try to get companies running as soon as possible, he added.
"It takes time to restart production at coal mines, especially in the current situation," said a manager at a coal mining firm in the region of Inner Mongolia.
Officials' priority was to make sure there was no virus outbreak at the mines, he added.
"All workers coming back from their home towns will be put into quarantine for 14 days, with no exception."
Some cities have also put up roadblocks on highways, aiming to restrict entry of vehicles from other regions and hold off the virus.
"There is not much coal being produced, and not much trucks carrying coal in the market either," said a trader based in the northern steelmaking city of Tangshan. "Everyone is waiting."


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