Original title: The thermal coal market is expected to meet a turning point in August, and local supply may be tight in the second half of the year
Entering August, thermal coal futures prices quickly stabilized after a sharp drop. From the perspective of supply and demand fundamentals, the price support for thermal coal is still relatively strong, and the market is paying close attention to the implementation of measures to increase coal production and stabilize prices.
With the gradual end of the high temperature at the end of August, the demand for thermal coal in power plants will also fall, and the market is expected to return to rationality. However, looking forward to the second half of the year, the shortage of coal supply and power supply in some areas may still occur.
On August 2, the price of black commodity futures plummeted, with thermal coal falling by more than 6%, leading this round of decline. The black series continued to suffer the next day, and while the market was speculating whether this was the turning point of the August coal market, thermal coal futures prices slowly stabilized.
On August 3, most domestic commodity futures closed down, among which hot-rolled coils fell 4.8%, rebar and stainless steel futures fell more than 4.5%, and the main contract price of thermal coal fell slightly by 0.5% to close at 867.80 yuan/ton.
Supply and demand support thermal coal prices are easy to rise but hard to fall
Recently, the price of bulk commodities has cooled significantly. Including iron ore, steel, copper and other commodities that are of concern to the market, prices have shown obvious signs of falling. However, with the strong support of electricity demand, the thermal coal market has remained hot.
At the beginning of mid-May, the main contract for thermal coal reached an all-time high of 944 yuan/ton, and has since experienced a rapid plunge. As of May 21, the price of thermal coal has fallen back to the level of mid-April, as low as 713 yuan/ton. Looking back at the price level over the past years, the figure of 700 yuan/ton still exceeds the highest level in many years.
Coal prices tend to rise but never fall. Since late May, thermal coal prices have once again embarked on a volatile upward path. Throughout July, the price of thermal coal has been rising all the way, and now it is approaching the 880 yuan/ton mark.
Compared with the decline in prices of steel and iron ore due to the off-season and limited production, thermal coal has no obvious off-peak season this year. In the first half of the year, due to the release of terminal demand, economic growth, mismatches between supply and demand, and the wave of commodity speculation, the tight domestic thermal coal supply situation drove up coal prices.
Since the beginning of summer this year, the temperature rise and the continued improvement of the economic situation have caused the demand for electricity to continue to rise. However, the replacement of hydropower is not as good as in previous years, and the rising temperature has brought about a peak in electricity consumption, and the demand for thermal coal in many places has only increased. In the first half of the year, power supply shortages have already appeared in many places.
On July 23, the “Analysis and Forecast Report on National Electricity Supply and Demand in the First Half of 2021” issued by the China Electricity Council showed that in the first half of this year, the electricity consumption of the whole society was 3.93 trillion kWh, a year-on-year increase of 16.2%, and an average increase of 7.6 in two years. %, the two-year average growth rates in the first and second quarters were 7.0% and 8.2%, respectively.
Among them, in the first half of the year, power supply was tight in some areas during certain periods; in January, affected by the cold wave weather, Jiangsu, Zhejiang, Anhui, Hunan, Jiangxi, Sichuan and Xinjiang all experienced power shortages; in the second quarter, Mengxi, Guangdong, Yunnan, Guangxi and other places have adopted measures to respond to demand or use electricity in an orderly manner. The power supply in Guangdong and Yunnan is particularly tight.
The China Electricity Council predicts that in the second half of the year, the power supply and demand in the central and southern regions will be tight during peak hours, and the situation in the southern region will be particularly severe. Power supply is tight during peak hours, and demand response or orderly power consumption measures will be required. Among them, Guangdong, Yunnan and Mengxi have relatively large power gaps.
During the peak summer period, if there is a continuous large-scale extreme high temperature weather, the areas with tight power supply will be further expanded to Jiangsu, Shandong, Henan, Hebei, Sichuan, Chongqing and other places.
West China Securities analyst Hong Yixin pointed out that despite the impact of weather and the epidemic, the daily consumption of power plants on the demand side of thermal coal is still at a high level of 10% in the same period last year, and there has been no significant increase in production and supply on the supply side. The price continues to be in a strong position.
Hong Yixin said that the current power plant inventory has entered a low level, and the port inventory is also at a low level. It is expected that the power plant will have greater pressure to replenish the inventory in the future.
Entering July, the increase in rain in many places and the power curtailment policy in some areas have slightly eased the load pressure on thermal power companies; but August is still the peak season in the market, and the daily consumption of coal power plants is still at a high level.
Supply and demand in some areas will remain tight
Under the combined influence of continued strong fuel demand and rising electricity coal prices, coal-fired power companies have also suffered. According to data provided by the China Electricity Council, in the first half of this year, coal-fired power companies have significantly expanded their losses. Some power generation groups lost more than 70% of coal-fired power companies in June, and the coal-fired power sector suffered a loss as a whole.
In the first half of this year, the growth rate of domestic coal consumption was higher than the growth rate of raw coal output, and coal prices were also operating at a high level.
According to data released by the China Coal Industry Association, from January to June this year, domestic coal consumption was approximately 2.1 billion tons, a year-on-year increase of 10.7%; during the same period, the country’s large-scale enterprises produced 1.95 billion tons of raw coal, a year-on-year increase of 6.4%; cumulative coal imports were 1.4 Billion tons, a year-on-year decrease of 19.7%.
Since the end of June, the National Development and Reform Commission has successively adopted measures such as promoting the release of high-quality production capacity, arranging coal reserves, and monitoring the performance of medium and long-term contracts to stabilize the coal market. Since then, the coal supply from the producing area has slowly recovered, but due to the impact of safety accidents and the counter-attack of the epidemic, the increase in coal supply from the producing area is limited, and the overall price is still rising.
In the near future, the move to stabilize prices and increase production continues. According to the National Development and Reform Commission, in July, the Inner Mongolia Autonomous Region approved land use procedures for 38 open-pit mines in Ordos City that had previously stopped production due to incomplete land use procedures, involving a production capacity of 66.7 million tons per year. At present, this part of coal mines have all resumed production, and the stripping operation is speeding up. It is expected that actual output will be formed in early August, and the daily output can be stably increased by 200,000 tons after reaching production capacity.
On July 30, the Operation Bureau of the National Development and Reform Commission announced that recently, the General Office of the National Development and Reform Commission, the General Department of the National Energy Administration, and the General Department of the National Mine Safety Supervision Bureau jointly issued a notice to encourage qualified coal mines to increase production capacity. , Implement a capacity replacement commitment system for the nuclear increase in coal mine production capacity.
Cinda Futures pointed out that part of the capacity that was nuclearly increased in July is expected to form actual output in August, and the supply is expected to usher in an increase; in addition, the replacement of new coal capacity in policy is somewhat relaxed, and an increase is also expected in the second half of the year. In the short term, the supply and demand of the thermal coal market is still tight, but there is an expectation of easing.
Thermal coal analyst Jenny of Shanghai Iron and Steel Coal Coking Division told the 21st Century Business Herald that the country’s high-temperature weather will gradually end in late August, and the pressure on coal use in power plants will also drop. It is expected that thermal coal prices will usher in a turning point in late August. At the later stage, attention should be paid to the situation of the epidemic situation and the implementation of measures to increase production and guarantee supply in the production area.
Recently, the National Development and Reform Commission visited Yulin and Ordos for investigation and urged mining areas to increase production and supply. It is expected that the supply from major producing areas will increase in August, and the high daily consumption of power plants caused by high temperature weather will also fall, procurement demand will be weakened simultaneously, and the overall tight supply and demand situation will also be eased.
The China Coal Association stated in its “Report on the Operation of Coal Economy in the First Half of 2021” that the demand for coal is still expected to maintain growth in the second half of the year, but the growth rate will decline compared with the first half of the year. Coal supply will further increase, but the market will still It may be affected by many uncertain factors such as policy adjustments, extreme weather, and emergencies.
The China Coal Association predicts that in the second half of the year, there will be tight supply and demand in some areas of the coal market during peak hours, and coal prices will fluctuate at a high level.
(Author: Peng Qiang, Editor: Li Qingyu)
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