Restructuring fuels rise in coal stockpiles, cuts prices

Coal inventories rise at the port of Qinhuangdao, Hebei province. The rising stockpiles indicate that downstream users at steel mills, cement factories and coal-fired power plants are reluctant to purchase fuel because of weak market conditions. Liu Xuezhong / For China Daily

China's drive to transform its economy, which includes reducing the role of energy-intensive industries and paring steel capacity, is driving up coal inventories at key ports as demand across a variety of sectors weakens.

Inventories at Qinhuangdao in Hebei province, the largest coal port in China, exceeded what's widely viewed as the warning line of 8 million metric tons on Feb 6, which was a 10-month high, according to the China Coal Transportation and Distribution Association.

The rising stockpiles indicate that downstream users at steel mills, cement factories and coal-fired power plants are reluctant to purchase fuel because of weak market conditions.

Xing Lei, a professor at the Institute of China Coal Economy at the Central University of Finance and Economics, said the coal market will be weak all year as policymakers pursue a slower-growing but "more stable" economy.

Xing said inventories at Qinhuangdao usually hover around 6 million tons, but the figure has been rising in the past few months.

In the past three weeks, the figure soared almost 2 million tons, reaching 8.28 million tons on Sunday.

Inventories are also rising at the other three major coal ports in North China - Caofeidian and Jingtang (both in Hebei province) and the municipality of Tianjin.

Inventories at the four major ports in North China totaled 22 million tons by the end of last week, according to the association.

"Weak downstream demand is the reason for the rising stockpiles, and the situation will continue for a while, which will exert pressure on market prices for thermal coal," said Liu Dongna, a coal analyst with consultancy Sublime China Information Co.