Flooding disrupts coal shipping on Yangtze river

Flooding in regions along China's Yangtze river since early this month has disrupted domestic coal shipping to surrounding regions. The flooding has also helped weaken power demand, weighing on domestic coal prices.

Coal vessels are having difficulty sailing to Hubei province and ports beyond Hubei because of the flooding. And vessels can only sail to Jiangxi and Anhui provinces, which are to the east of Hubei, with loads reduced to well below their normal capacity because of high water levels.

China's domestic coal can normally be shipped from ports in north China to regions along the Yangtze river, which include Jiangsu, Anhui, Jiangxi, Hubei and Hunan provinces and Chongqing municipality.

Shippers are reluctant to send vessels even to Anhui and Jiangxi because they have to load the vessels at below capacity, undermining the economics on a cargo, market participants told Argus.

Shipping to Jiangsu, which is in east China and near Yangtze estuary, has not been affected much by the flooding.

The affected provinces are not in urgent need of coal restocking, despite reduced coal intake, because lower temperatures and rainy weather have cut power use for air-conditioning. Flood-related disruptions to economic activity have also dampened industrial power demand in the regions.

"Many utilities [in regions along the Yangtze river] are running only one of their generating units because of weak power consumption," a domestic coal trader told Argus.

Utility offtake from ports in north China slowed partially because of sluggish demand in regions along the river this week. Offtake from the main coal-handling port of Qinhuangdao in north China averaged 475,000 t/d over the week ending yesterday. This was down from 549,000 t/d a week earlier, according to data compiled by coal industry association the CCTD. Slower offtake left inventories at Qinhuangdao at a two-and-a-half month high of 5.32mn t on 20 July. The stocks remained flat on the day yesterday.

Domestic coal prices kept declining this week, with bids for NAR 5,500 kcal/kg coal at 570-578 yuan/t ($81.40-82.60/t) fob ports in north China. Offers were around Yn580/t fob. Both bids and offers indicate a decline from the latest Argus assessment of NAR 5,500 kcal/kg prices at Yn586.42/t fob Qinhuangdao on 17 July.

The flooding along the Yangtze river may ease gradually as the rainy season has ended in most of the affected regions. Some market participants expect the higher temperatures to raise power consumption soon, lifting coal demand.