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Cement market strength supports Chinese coal prices

  • Market: Coal, Petroleum coke
  • 09/09/20

China's cement prices increased sharply this month as activity resumed in the construction sector, potentially supporting domestic coal prices.

Cement producers in Zhejiang, Anhui, Jiangsu and Jiangxi provinces raised their asking prices for cement clinker by 20-30 yuan/t recently. The move came as construction projects restarted in various regions after the rainy and hot summer season in July and August. Higher cement prices are likely to raise the price that cement producers will pay for coal.

A few infrastructure and building projects were forced to suspend construction in July following floods in many parts of the country. Construction normally slows in summer to allow workers some time off during the hot afternoons. The recovery of construction this month is likely to have boosted cement demand.

Around 10 provinces ordered cement producers to suspend production for varying periods during June-September to reduce emissions from power use in the summer peak season. Many of them are due to restart before early September, also potentially raising demand for thermal coal.

China's cement production normally increases during September-November against July-August, the lull season for the construction sector. Cement output in September 2019 was 217.65mn t, up from 210.18mn t the previous month.

Firmer demand and tighter supplies are supporting domestic coal prices, with bids for NAR 5,500kcal/kg coal at around Yn556-558/t fob ports in north China today, while offers were around Yn560-564/t. This compares with the last Argus assessment of Yn558.08/t ($81.64/t) fob Qinhuangdao on 4 September.

Coal consumption by the construction sector, which mainly comprises cement and glass producers, was 50mn t in July. This was up by 2.4pc from a year earlier, making construction the second-largest thermal coal-consuming sector after power generation.

But firmer coal demand by cement producers is unlikely to raise demand for imported coal because of government restrictions. Almost all domestic cement producers were denied import quotas this year as Beijing put stricter curbs on coal imports compared with the past two years.

Chinese coal imports fell again in August because of tighter quotas, with last month's year-on-year decline steeper than in July. The imports, including anthracite, coking coal and thermal coal, reached an intra-year low of 20.66mn t in August, according to preliminary customs data. This was a 37pc drop from a year earlier, steeper than a 21pc year-on-year fall in July.


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27/11/24

Australia's BOM forecasts severe cyclone season

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Sydney, 27 November (Argus) — Australia's Bureau of Meteorology (BOM) expects the country to experience 11 tropical storms over the next few months, threatening the country's mineral-rich Pilbara region and coal infrastructure in Queensland. The number of storms is in line with historical averages, but BOM warns that rising ocean temperatures could increase their severity. The state weather agency believes that four of these storms will make landfall from late December, and that a La Nina event could start later this year, although it may not last very long. La Nina events are associated with high levels of cyclonic activity. BOM's forecasts suggest that five of the storms are likely to form around Western Australia's mineral-rich Pilbara region, which houses more than 40 operating iron ore mines and two lithium mines. Over the last three months, sea surface temperatures around Pilbara have exceeded historical averages by 1.2–2°C, warming more than in any of the country's other cyclone-prone regions. On the other side of the country, four tropical storms could form around Queensland's cattle and coking coal producing regions, although these are likely to be less severe than the Pilbara storms. Temperatures across most of Queensland are forecast to exceed historical averages by 0.4–1.2°C in October-December. Cyclonic weather in Pilbara could disrupt iron shipping and mining activity in the region. Australia's three largest iron export ports sit along the region's coast. In 2019, Cyclone Veronica forced the closure of Pilbara's three major ports and multiple mines operated by mining company Rio Tinto, prompting the firm to cut its production forecasts for the year. Harsh storms in Queensland have previously damaged vital coal transport links in the state, hampering exports. In 2017, Cyclone Debbie damaged rail lines linking coal mines to the ports of Gladstone, Hay Point, Dalrymple Bay, and Abbott Point, which handle most of the state's coking coal exports. More recently, severe weather also halted deliveries to Mackay port . Queensland and Pilbara are also home to major LNG terminals at Dampier and Gladstone ports that sit within cyclone-prone zones. The two terminals together export over 3mn t/month of LNG . By Avinash Govind Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Opinion: Bridging the divide


22/11/24
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22/11/24

Opinion: Bridging the divide

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Japan’s Taketoyo to resume biomass co-firing in 2027


22/11/24
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22/11/24

Japan’s Taketoyo to resume biomass co-firing in 2027

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Cost of government support for fossil fuels still high


21/11/24
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21/11/24

Cost of government support for fossil fuels still high

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Cop: Australia backs no new coal power call: Correction


20/11/24
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20/11/24

Cop: Australia backs no new coal power call: Correction

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