Shenhua may raise October prices by 5-10 yuan/t, sources

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Shenhua may raise October prices by 5-10 yuan/t, sources

China’s topcoal producer Shenhua Group may increase thermal coal prices by 5-10 yuan/t next month, as demand from utilities is expected to improve while supply may tighten at northern China ports, sources said. 

Supply of thermal coal from Shenhua is a bit tight recently, with stocks at its self-owned Huanghua port dropping to only 1.24 million tonnes on September 24, said a Beijing-based trader.

Though the overall demand remains weak, low inventories and government directives may prompt Shenhua to further increase prices next month, said an Inner Mongolia-based trader. He said it is even likely for the group to raise prices by as much as 20 yuan/t.

But, a Guangdong-based utility source considered a 20 yuan/t jump unlikely to materialize, given the still weak demand. "The increase is very likely to be 5-10 yuan/t," he said.

Although Shenhua raised prices by 5 yuan/t in September, the sales volume has not been affected, at around the same level as in August, said salesman with Shenhua.

"The strategy for Shenhua was to raise prices step by step, if they could secure sales volume," said one source from a Fujian-based utility.

Worrying about further price rises by large groups, some traders and utilities boosted purchases in the last week of September. One shipping source said chartering activities were stronger this week, leading to a 2-3 yuan/t rise in domestic seaborne freight rates.

Led by Shenhua, China’s top coal producers increasedthermal coal prices by 5 yuan/t in September, offering 5,500 Kcal/kg and 5,000 Kcal/kg NAR coal at 484 yuan/t and 424 yuan/t with VAT, FOB Qinhuangdao, to long-term buyers.

If more buyers rush to load coal at northern ports next week, Shenhua would have more reasons to raise prices for October, said Eric Zeng, an analyst with Fenwei Energy.

Thermal coal prices edged up slightly at northern China ports this month. The Fenwei/Platts China coal index(CCI 1) assessed domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port at 474.5 yuan/t with VAT, FOB basis, on September 24, up 5 yuan/t from the end of August.