(Yicai Global) Nov. 17 -- A combination of factors has put the brakes on soaring coal prices in China, with benchmark prices falling for two sessions in a row. But industry experts believe prices are unlikely to slump when winter heating demand ends next year.
There is no basis for a decline in prices, Deng Shun, a commodity analyst at Success Futures and Foreign Exchange Ltd., said during an interview with Yicai Global.
"Coal inventory is at a low level, and coal is in short supply among downstream users," he said. "Inventories at ports are relatively high, but many ships are busy hauling coal and downstream demand has been strong. Supply and demand has been brought into balance, but there won't be a large surplus. Coal prices are firming up."
Coal producers are now in a tug-of-war with the fuel's largest consumers -- power companies, according to Wang Qiuli, a market analyst at commodity research website Chem365.net.
"Coal producers and power plants have entered into long-term supply contracts to stabilize prices," he said. "However, rising pithead prices further squeezed profits out of intermediate traders. At present, power plants have replenished coal inventories to the normal level, but they're not overstocked. And upstream coal producers are also sticking to the sidelines."
Between January and Nov. 8, the Bohai-Rim Steam-Coal Price Index (BSPI) rose for 18 sessions in a row, reaching a series of new highs in the year until hitting the brake last week. The latest market benchmark price -- Bohai-Rim 5,500 kilocalories per kilogram NAR coal average price -- closed at CNY604 (USD89.14) a ton, down CNY2 from a month earlier, marking two straight sessions of losses.