China’s weak property market and sluggish industrial activity are weighing on coal prices even as a spate of government safety checks curbs output.
Key industrial users of the fuel including steel mills and cement plants are demanding more discounts on coal purchases to help cover losses, and many have curtailed operations, Chao Yuke, an analyst with the China Coal Transport and Distribution Association, said at a briefing on Wednesday.
The poor demand is underscoring the uneven nature of the economy’s rebound. While people are flocking to restaurants and boarding trains and planes in massive numbers, weak housing sales and muted industrial activity are capping demand for manufacturing raw materials like copper and coal. Last week’s reading from purchasing managers showed the factory sector contracting in April for the first time this year.
China’s coal miners held about 68 million tons in inventory at the end of April, 21% more than at the same time last year, CCTD analyst Feng Huamin said. The healthy stockpiles should shield coal prices from the impact of safety inspections that have halted output at mines with nearly 50 million tons of annual capacity, equivalent to over 1% of China’s output last year.
Benchmark coal prices at the trading hub of Qinhuangdao were last quoted at 992 yuan a ton, down 16% from the start of the year.