Original title: Coal price limit “returns”: the National Development and Reform Commission three sets of heavy blows to control and promote the balance of supply and demand
Source: China Business Network
Our reporter Zheng Dan reports from Beijing
“Price limit has been done in history, but it has not been as large as this time.” In response to the “Implementation of Intervention Measures on Coal Prices According to Law” issued by the National Development and Reform Commission on October 19, the deputy of China Coal Transportation and Marketing Association Chairman Shi Ying said, “We especially hope that the price can stabilize, so we agree. Now the market coal price is indeed going up a bit crazy, and the impact on the industry as a whole is particularly bad.”
Recently, coal prices have risen rapidly, hitting historical highs in succession, greatly pushing up the production costs of downstream industries, and adversely affecting power supply and winter heating, and all aspects of society have responded strongly.
On the afternoon of October 19th, the National Development and Reform Commission organized key coal companies, China Coal Industry Association, and China Electricity Council to hold a coal seminar on the energy supply mechanism for this winter and next spring to study the implementation of intervention measures on coal prices in accordance with the law.
Shi Ying, who participated in the meeting, told reporters that the reasons for the price limit proposed by the meeting include: “two serious”, that is, coal prices are seriously deviating from the market, and the coal market is severely distorted; “two cannot”, downstream enterprises cannot afford, and society cannot Bear; “Two Laws” requires severe crackdowns and price interventions in accordance with the law.
The ultimate goal of price limit is to achieve “two returns”: the price returns to a reasonable level and the market returns to the normal track.
In the afternoon of the same day, the National Development and Reform Commission also presided over a symposium on key coal, power, oil and gas transportation companies to ensure supply and price stabilization to study and arrange for the people to warm up the winter through various key tasks. Representatives of key enterprises including National Railway Group, PetroChina, Sinopec, CNOOC, State Pipeline Company, State Grid, China Southern Power Grid, Huaneng, Datang, Huadian, State Power Investment, China Resources, National Energy, China Coal and other key enterprises attended the meeting.
In addition, the main person in charge of the Finance Department of the National Development and Reform Commission led a team to the Zhengzhou Commodity Exchange to investigate and hold a special symposium to study the price trend of thermal coal futures this year, strengthen supervision in accordance with the law, and severely investigate and punish the malicious speculation of thermal coal futures by capital.
For a time, the National Development and Reform Commission made a heavy strike of “combined punches”, which directly led to the full limit of thermal coal futures on the night of the 19th.
On October 20, ZCE issued an announcement that starting from the night trading on the night of October 21, 2021, non-futures company members or customers will be trading in thermal coal futures 2111, 2112, 2201, 2202, 2203, 2204, 2205, 2206 , 2207, 2208, 2209 and 2210 contracts, the maximum number of open trades on a single day is 50 lots.
Thermal coal futures full contract lower limit
Zhao Yongjun, chief analyst of the black department of China Securities Futures, told reporters that under the positive pressure of the National Development and Reform Commission’s policies, bulls panic and collective stampede. On the night of October 19, the main thermal coal contract opened sharply lower, and fell 8.01% after the shock to close the limit; in addition, the rest of the thermal coal contracts all fell to the limit, and coke and coking coal also fell to the limit.
According to Zhao Yongjun’s analysis, as of the close of the market on October 20, 18,000 short orders for the main 01 contract sealed the limit, accounting for more than 20% of the contract holdings, and the longs were full of panic. In the past two months, the sharp rise in futures and spot stocks has completely exceeded market expectations. The 01 contract on the disk has increased by more than 160%. Although the policy side has successively introduced measures to stabilize prices and guarantee supply, the market is still reaching new highs. The port spot 5500 kcal coal The highest rises above 2500 yuan/ton, and the premium to the standard board exceeds 500 yuan/ton.
“Many varieties have lower limit at the same time, for example: 1800, 2100, 2200, 2300 all lower limit. I have almost never seen this.” Shi Ying told reporters that this is directly related to the announcement issued by the National Development and Reform Commission on October 19.
“The function of futures is to find prices. In the past two years, the coal market has been extremely volatile, and futures have played a leading role in the rise and fall. In other words, when the market is short of coal, the spot will rise very quickly. ; Suddenly lowering the limit on the evening of October 19 will also contribute to the spot market.” Shi Ying believes that whether the spot change is significant depends on the specific measures and speed of government intervention in coal prices according to the law. “When a reasonable and compliant price-limiting policy comes out, there can only be as much as the limit. There are no more detailed measures yet, but it should be soon.”
Lin Boqiang, dean of the China Energy Policy Research Institute of Xiamen University, believes that it is not surprising that the rest of the thermal coal contracts will fall to the limit, and it will not have much impact on the spot price, because there are also factors such as transmission time and hard coal gaps. “In terms of spot, coal prices are unlikely to fall sharply because it is currently a seller’s market. There is no problem with futures falling a lot. Futures speculate in future prices, and speculation prices generally deviate significantly from the fundamentals.”
Lin Boqiang introduced to reporters that “supply and demand fundamentals” refer to the imbalance between supply and demand, not only in China, but also in the world where supply exceeds demand.
Shi Ying added, “From the government level, when the problem arises at the beginning, it is of course hoped to solve it through market regulation. However, if the coal price rises to this level, the country will continue to increase the price of coal if it does not take any action. Because the gap between supply and demand has always existed, coal is a rigid demand when there is a lack of electricity, and the hard gap, coupled with the hype fuelled by speculation, can keep coal prices rising a lot.
On October 19, the National Development and Reform Commission announced that coal is an important basic energy source and is closely related to the national economy and people’s livelihood. The current price increase has completely deviated from the fundamentals of supply and demand, and the heating season is approaching, and the price is still showing a further irrational upward trend. The National Development and Reform Commission will make full use of all necessary means stipulated in the Price Law to study specific measures to intervene in coal prices, promote the return of coal prices to a reasonable range, promote the return of the coal market to rationality, ensure a safe and stable supply of energy, and ensure the people’s warmth through the winter.
Article 30 of the “Price Law” clearly stipulates that when the prices of important goods and services rise significantly or are likely to rise significantly, the State Council and the people’s governments of provinces, autonomous regions, and municipalities may adopt a limited price difference or profit rate, set price limit, Implement intervention measures such as the price increase declaration system and the price adjustment filing system.
Both ends of the imbalance between supply and demand are regulated
Lin Boqiang told reporters that in China’s power system, thermal power accounts for nearly 70%, so coal is the main energy source for power generation. From coal mining, transportation, to power generation, the entire process is an industrial chain. In this chain, the upstream is the supply of coal, the downstream is the power generation device (power plant, power grid), and the end is the consumer of electricity, including industry and residents.
As the coal industry operates in a market-oriented manner, rising coal prices will drive up downstream electricity prices, and the entire downstream industrial chain will be affected. Zhao Yongjun believes that with the increase in coal prices, power plants have suffered serious losses, and industrial and commercial electricity consumption has begun to fluctuate and rise, which has brought increased costs to the manufacturing industry. The phased shortage of coal is the main reason for this round of coal price increases. At the same time, global coal prices have risen, and imported coal has no price advantage at all, which has made domestic coal supply even worse.
“Now there is an imbalance between supply and demand. At a critical juncture, the government can intervene in coal prices.” Lin Boqiang said.
At present, the state regulates separately from the supply side and the demand side of the entire power system. On the demand side, through strict control of power consumption in high-energy-consumption and high-polluting industries, to ensure that the performance rate of the long-term agreement for electricity and coal will reach or exceed 100% in the fourth quarter, and to adjust the fluctuation range of electricity prices to implement “guaranteed supply” measures.
On the morning of October 12, the National Development and Reform Commission issued the “Notice on Further Deepening the Market-oriented Reform of Coal-fired Power Generation On-grid Tariffs”, which clarified four important reforms: one is to require the orderly liberalization of on-grid electricity prices for all coal-fired power generation; Expand the range of fluctuations in market transaction electricity prices, and expand the upper limit of the fluctuation range of coal-fired power generation transaction prices to 20%; third, promote industrial and commercial users to enter the market and abolish industrial and commercial catalog sales prices; fourth, maintain stable electricity prices for residents, agriculture, and public welfare undertakings . The notice will be implemented on October 15, 2021.
But the problem also followed. Zhao Yongjun told reporters that after the power plant’s 100% long-term cooperative direct supply, it squeezed the market share of coal to a certain extent, and once made the market coal supply in short supply. “The rise in industrial electricity prices once made the market suspect that the policy side had tolerated the rise in coal prices. Because the rise in electricity prices allowed power plants with huge losses to breathe, but transferred costs to end users. Therefore, the recent rise in coal prices, It also appears unscrupulous.”
Therefore, on the supply side, in addition to the previous “guaranteed supply” measures that required companies to tap into the potential of thermal coal production to increase the supply of thermal coal, the National Development and Reform Commission directly restricted the rise of coal prices in accordance with the “Price Law”. Strictly investigate coal price speculation and increase the intensity of intervention to an unprecedented level.
Zhao Yongjun told reporters that the intensity of guaranteeing the confession is unprecedented. “Before we went to Yulin to conduct research, the local coal mine said that it was difficult for coal mines to apply for nuclear increase in production capacity. However, after the requirement of’increasing production’, in just two months, the nuclear capacity has been increased by more than 200 million tons, with an average daily output. An increase of 1.5 million tons from September, and new coal mine projects have been put into operation one after another, and the supply side has been significantly improved.”
Zhao Yongjun continued to add that the difference from the source of the supply side-coal pit cost to the final price is very large. According to field investigations, the lowest pit price of a coal mine in Yulin is 130 yuan/ton, but it can be sold as high as 1700 yuan/ton at the current market price. If it is resold by dealers, the final price will be higher. The National Development and Reform Commission previously conducted surveys on coal costs, which also paved the way for the current regulation of coal prices in accordance with the “Price Law.” “Coal prices have greatly deviated from the reasonable range. From the perspective of cost and profit, administrative intervention in coal prices, compared with lower pit costs and huge profits, there is a lot of room for regulation.”
“This kind of intervention is actually not the first time, and it shouldn’t be the last.” Lin Boqiang said that the government has repeatedly intervened in coal prices through “verbal guidance”, but coal prices have continued to rise in the past two years. Did not achieve the desired results.
Shi Ying also confirmed this to reporters. The China Coal Industry Association has issued at least two “guaranteed supply and stable prices” proposals, calling on coal companies to reduce coal prices. However, since the members of the association are all state-owned coal companies, it cannot affect the “skysurge” of local coal companies. Not ideal. “I have been in the coal industry for so many years. I have only experienced the 2012 National Development and Reform Commission’s temporary intervention measures. The price of the port was restricted to no more than 800 yuan/ton. Like this time, the price of coal has risen so much, and the price limit is so strong. , Never appeared before.”
“This control is a short-term behavior, not a long-term behavior.” Shi Ying believes that the state’s timely intervention can solve the temporary contradiction between coal supply and demand. “If in the short term, the excessively rapid increase in coal prices is suppressed, the hard gap is made up again, and production and supply are increased, coal prices will naturally come down.”
On October 19th, the key coal, power, oil and gas transportation companies pointed out that in accordance with the deployment of the Party Central Committee and the State Council, all relevant parties have vigorously and orderly promoted the implementation of energy supply and price stabilization, which has achieved initial results. Since the end of September, a batch of production coal mines have been approved, and the average daily output has increased by more than 1.2 million tons from September. The daily output on October 18 has exceeded 11.6 million tons, a new high this year.
The meeting also pointed out that at present, coal storage in power plants nationwide is nearly 88 million tons, which can be used for 16 days, an increase of more than 9 million tons from the beginning of the month. Among them, power plants in the three northeastern provinces can store coal for 24 days, an increase of 11 days from the beginning of the month. On the basis of the signed annual medium and long-term contracts, power generation and heating companies and coal companies signed another 150 million tons of medium and long-term contracts. The contract signing rate in most provinces has reached or close to 100%, and the coal gap in some provinces has been fulfilled in the medium and long-term contracts. Coal source is stepping up to sign the contract. At the same time, the market-oriented reform of coal-fired power generation tariffs has been further deepened. Recently, new market transaction prices in Jiangsu, Shandong, Hubei, Shanxi and other places have increased by nearly 20% in accordance with the price policy.
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