China’s coal market cooled on Monday after the country’s week-long Golden Week holiday as inventory in major ports increased and authorities ordered more steel mills to curb production, hurting demand of coking coal.
Coal stocks at China’s largest coal trading port Qinhuangdao touched 6.7 million tonnes on Oct. 3 from 6.24 million tonnes just before the holiday, and highest since late December last year.
The inventory compared with only 3.55 million tonnes in 2016, illustrating the dramatic change in market conditions since a year ago when the government was scrambling to avoid winter fuel crisis. Current levels are around the average of 2013, 2014 and 2015, seasonal analysis of port data showed.
Stock levels with China’s six-largest coastal power plants climbed to 10.46 million tonnes on Monday, up from 10.29 million tonnes a week ago, but far below the level of around 13 million tonnes in June when power consumption peaked, data provided by Qinghuangdao port showed.
“The Qinghuangdao port has increased its stocks ahead of the upcoming maintenance of the key Daqin railway. More purchases from utilities for winter will soon fuel a rebound in thermal coal price,” Wang Fei, an analyst with Hua’an Futures said.
Daqin Railway, which stretches from Datong in major coal mining province of Shanxi to Qinhunagdao, undertakes autumn maintenance every year around October for about three weeks, cutting off some coal supplies to power plants.
A growing campaign to curb production in more than 28 northern China cities added another blow to coking coke demand amid increasing worries of oversupply.
Authorities have ordered heavily air-polluting industries, including steel, to curb output and cut emissions during the five-month winter heating period which begins on Nov. 15.
But some cities such as Handan in the top steel-making province of Hebei ordered its steel mills to halve output from Oct. 1, a move seen as aimed at clearing the skies for Congress later in the month. The most-active thermal coal futures prices fell more than 1 percent to 619 yuan ($93.49) per tonne, their lowest official close since Aug. 31.
Coking coal prices dropped 3 percent to 1,091 yuan ($164.78) per tonnes on the first trading day after the national day holiday, and off more than 25 percent from a record 1,506 yuan per tonnes on Aug. 25.