[Ferro-Alloys.com] Much expected flurry in Chinese buying of thermal coal before the winter is unlikely to give traction to the coal prices. Restocking season typically commences in September-October with maintaining inventory levels at nearly 21-23 days stocks.

 

However this year the stocks have remained at much higher level all through owing to weak power demand during the peak of summer and increased hydroelectricity generation. It is learnt that most major power plants are having stocks of 25 days consumption (85 million tonnes).

 

Another important reason for poor coal consumption has been sluggish industrial growth. Industrial production being major power consumer accounting for 72.9% of the overall power demand has given body blow to coal consumption. Despite series of economic stimulus the turnaround has been elusive. HSBC Markit Purchase Managers Index (PMI) still remains at 47.8 signifying contraction.

 

Despite expectation of declining hydro generation being substituted by coal fired power generation during winter prices are expected to remain unchanged in Q4.