In the first two months of this year, China's coal market remained generally stable. However, with the prospect of increasing demand in the future, there are initial signs of rising prices for coastal electricity coal. Analysts predict that the "turning point" for the fundamentals of the coal industry is approaching.
According to information from the National Development and Reform Commission (NDRC) on the 29th, during January-February this year, the supply and demand of coal nationwide was generally balanced, and coal prices remained stable. The NDRC predicts that the coal market will continue to show a generally stable trend in the coming period. However, due to some uncertain factors, there is still a possibility of supply-demand imbalance in certain regions.
Statistical data shows that from January to February this year, the national raw coal production was 516 million tons, an increase of 13.5% year-on-year, while sales amounted to 497 million tons, up 7.1%. By the end of February, coal mine enterprises had inventories of 46.3 million tons, up 20.3% year-on-year; major transfer ports across the country held 24.71 million tons of coal, an increase of 35.9%; key power generation enterprises stored 53.86 million tons of coal, up 9.1%, equivalent to 16 days of usage.
Against the backdrop of ample inventory and balanced supply and demand, coal prices also remained stable. By the end of February, the price of 5500 kcal high-quality thermal coal at Qinhuangdao Port was 765-775 yuan/ton, an increase of 60 yuan/ton compared to the same period last year, but down 20 yuan/ton from the beginning of the year; the market price of coal at Guangzhou Port was 820-840 yuan/ton, down 20 yuan/ton year-on-year, and down 30 yuan/ton from the beginning of the year.
Currently, affected by rapid economic growth and accelerating recovery in output of major coal-consuming products, coal market demand is trending upward. "From January to February, the national thermal power generation and output of crude steel, cement, and others all maintained relatively fast growth. Since entering March, coal consumption by power plants has quickly rebounded, and the daily average coal consumption of the first 24 days for key power plants nationwide approached the level of the coal consumption peak season in January," according to the NDRC analysis report.
The NDRC report pointed out that from the perspective of market coal prices, they are also showing an upward trend. On March 24, the market price of 5500 kcal thermal coal at Qinhuangdao Port was 770-780 yuan/ton, an increase of 5 yuan/ton compared to the end of February.
It is worth noting that regarding imports and exports, from January to February, China imported 23.32 million tons of coal, down 18.8% year-on-year; exported 3.19 million tons, down 7.3%; resulting in a net import of 20.13 million tons of coal. Among them, in February, imports were 6.76 million tons, down 47.6% year-on-year; exports were 1.76 million tons, up 8.6%.
Regarding the significant change of declining coal imports and exports, the NDRC identified two main reasons. First, affected by events such as flooding in Australia, international coal resource supplies are tight; second, international coal prices have continued to rise, inhibiting companies' enthusiasm for importing. However, influenced by rising international coal prices and market demand, coal exports rebounded in February.
"Affected by unrest in the Middle East and flooding in Australia, international oil and coal prices will not see significant declines in the next quarter. Therefore, before domestic coal prices in China show obvious increases and the price differential between domestic and international markets is eliminated, the trend of declining Chinese coal imports will not change," said Chen Liang, chief researcher of coal securities at Huatai United Securities.
Currently, "Daqin Line has not yet undergone maintenance, spot prices of thermal coal have not risen, the summer electricity consumption peak season has not arrived, and the demand pull effect from Japan’s post-disaster reconstruction has not started... There are still many short-term benefits that have yet to be realized." Chen Liang believes that the fundamental turning point for the coal industry has initially appeared, and there are signs of rising prices for coastal electricity coal. According to statistics, from March 16 to 22, the average ex-warehouse price of 5500 kcal market thermal coal at Bohai Rim region ports was 770 yuan/ton, up 3 yuan/ton from the previous period.