With the Chinese government effectively abandoning drastic curbs on imports of high ash/sulphur coals, and hesitation for pricing into S. China in Q4 finally easing, we expect support for international coal, says Georgi Slavov, head of basic resources research group Marex Spectron.
"As already discussed with a number of market participants, we have never believed that the widely circulated 1% sulphur cut-off will be implemented. Firstly, because pollution has been on a downtrend this year and secondly, imports of international coal have been going down already," he said.
"The trajectory for coal consumption in Asia Pacific is looking up as Chinese hydro production has peaked (August landing at an astounding 39% increase y-o-y) and the monsoon season in India in its final throws. Furthermore, for the second month in a row, we are seeing a normalization of the coal stocks in China. In our seasonally adjusted inventory model, stocks at the mine level are still persistently high (7% above trend cycle), however port stocks are 2% lower than what we would expect in September," he said.
Source: http://www.resourceinvestor.com