Coal Prices Continue To Fluctuate High, Non Market Factors Undercurrent Disturbance

    The gap in the supply side superimposes the demand for rigid replenishment, and the coal price in the off-season may remain high.

According to the latest data of the Bureau of statistics on September 6, among the 50 kinds of important means of production in nine categories in the national circulation field, the prices of 20 kinds of products increased, 24 kinds decreased and 6 kinds remained flat in late August 2021 compared with the middle of August. Among them, coking coal (main coking coal) and coke (secondary metallurgical coke) rose the most, up 24.8% and 12.6% respectively. Thanks to this, wind data shows that 35 listed companies in the coal industry achieved a total net profit of 68.7 billion yuan in the first half of the year, with a year-on-year increase of 62%.

    “ This week, coal prices continued to rise. In terms of supply, some ports in Mongolia were closed due to the epidemic situation, and some domestic coal mines were shut down due to safety accidents, and the coal supply side continued to be tense. In terms of demand, the peak summer is coming to an end, and the demand for steam coal will gradually weaken, but the downstream inventory is still at a low level, and the rigid replenishment of coal will have a strong support for coal prices Industrial Securities analyst Wang Kun analysis said that under the dual effect, short-term coal prices are expected to maintain high volatility.

Coal prices continue to rise in summer

The past July to August was the peak of electricity consumption in the "peak summer". Affected by the large-scale high temperature weather and the sustained rapid recovery of the industry, the supply and demand of the coal market continued to be tight, and the coal price rose.

At the end of July, the National Energy Administration released data showing that since the beginning of this year, the nation's highest power consumption load has reached a record high for six consecutive months. The power consumption of the whole society is growing rapidly, and the contribution rate of industrial power consumption is significantly higher than that of previous years.

According to the data, in the first half of the year, the electricity consumption of the whole society increased by 16.2% year-on-year, 15.8% compared with the same period in 2019, with an average growth of 7.6% in two years. Industry is the main driving force for the growth of electricity consumption. In the first half of the year, industrial power consumption increased by 16.5% year on year, contributing nearly 70% to the growth of electricity consumption of the whole society.

In this case, the industrial power consumption has obviously increased the coal consumption. In the first half of this year, coal consumption increased by 10.7% year-on-year, 8.1% over the same period in 2019, with an increase of more than 200 million tons. Among them, coal for power generation and building materials continued to grow rapidly, with a year-on-year growth of 15.7% and 12%, respectively. The contribution rate of power coal to the growth of coal consumption reached 76.7%.

The rise of coal price also stimulates the coal industry profit to continue to rise, the black market continues to be hot. According to the report of Listed Companies in the coal industry, the overall performance growth rate is more than 60%. According to the National Bureau of statistics, in the first half of 2021, the total profits of Coal Enterprises above Designated Size in China totaled 206.88 billion yuan, up 113.8% year on year.

Zhai Kun, a coal analyst at Guotai Junan, said that it is a foregone conclusion that steam coal will not be weak in the off-season, and the acceptance of high coal prices will continue to increase under the trend of rising electricity prices.

Coking coal is an important upstream raw material for coking and iron and steel industry. Coking coal is connected with coal, coke and steel industries and plays an important role in the industrial chain. Under the background of the month on month decrease of steel production in the off-season from July to August, the price of coking coal rose significantly more than expected, and the tight supply still continued.

With the arrival of September, the market's expectation of a sharp reduction in steel production has recovered, and that of the upstream has been greatly improved.

On the other hand, in Zhai Kun's view, overseas coal prices have reached a new high again, and imported coal has no price advantage. At present, the price of overseas power coal has risen sharply again, approaching us $180 / T. although the repeated epidemic situation will affect the pace of economic recovery, the direction of recovery has not changed. The strong demand for global economic recovery is the core factor supporting the high coal price. As new energy sources are difficult to release rapidly, the increase of traditional energy demand drives the prices of oil and natural gas to continue to rise, The domestic coal price is highly linked with overseas coal price, and there is no price advantage for imported coal, so the domestic coal market has a bright future.

54000 new coal related enterprises were added in the first half of the year

This continued rising trend may be disturbed by non market factors.

Previously, Zhou Dadi, an academic consultant of China Energy Research Association, said publicly that there was no substantial shortage of coal from the perspective of China's current supply capacity“ The production capacity of coal mine is highly adjustable. Although there are requirements for various aspects of safety, such as the operating rate, which can not exceed the quota production, in fact, the quota of coal mine is indeed elastic. In terms of continuous production capacity or the use of working face, arrangement and new mining ratio, the same mine has at least 10% - 20% flexibility. "

According to the "report on the economic operation of coal in the first half of 2021", the coal price has been running at a high level in the first half of 2021. From January to July, the average price of medium and long-term contracts was 601 yuan / ton, up 62 yuan / ton year-on-year.

In Zhou Dadi's view, China's coal industry concentration is higher and higher, and there is room for price control in all aspects of coal trading. Recently, many new enterprises focus on coal sales, which is the so-called "middlemen", which may affect the trend of coal market. According to public data, 54000 new coal related enterprises were added in the first half of this year, up 24% year-on-year.

In the face of the short-term difficult to reverse the tight pattern of coal supply, the national development and Reform Commission on the one hand to enhance the coal reserve capacity, on the other hand, it is also strengthening market supervision. After entering the off-season, the situation of short supply before may be greatly changed.

The national development and Reform Commission said on July 16 that the country is promoting the construction of coal reserve capacity, with the overall goal of forming a coal reserve capacity equivalent to 15% of the annual coal consumption and about 600 million tons, of which the government can dispatch coal reserves of no less than 200 million tons, which are directly dispatched by the state and local governments, and the other 400 million tons are enterprise stocks, which are regulated through the minimum and maximum inventory system.

In fact, after years of construction, China has formed a 100 million tons of government adjustable reserve capacity, and will accelerate the construction of more than 100 million tons of reserve capacity. At the same time, we will promote the operation of reserve facilities to increase coal storage, strengthen management, speed up turnover, and ensure that coal reserves can play a timely and effective role. This also means that the national level will further improve the mechanism of coal supply and price stability, adjust the supply relationship, enhance the macro-control ability of the market, and inject a dose of "stabilizer" into the coal price that rises too fast.

On the other hand, the stricter market regulation will also lower the price of coal. The national development and Reform Commission (NDRC) announced on August 26 that in view of the recent release of coal price rise information by Yulin coal trading center, the leading group of Yulin City in Shaanxi Province to ensure the stable operation of the market decided to carry out a special investigation within the whole city, verify and verify the content of the relevant public number, and investigate and deal with it according to relevant regulations, Interview the main person in charge of the organization and deal with it according to relevant regulations; On August 30, the national development and Reform Commission issued another document, requiring the Energy Bureau of the Inner Mongolia Autonomous Region to check and correct the leading price increase behaviors of the guaranteed supply coal mines or production capacity replacement mines in the region, such as Mataihao coal mine, wangjiata coal mine, GaoJiaLiang coal mine and Erlin rabbit coal mine.

With the end of the peak summer, the tight supply and demand of coal in China has improved. On August 25, the national development and Reform Commission (NDRC) said that electricity coal consumption dropped significantly and coal storage in ports increased steadily. After the peak of coal consumption in the first ten days of August, the consumption of electric coal in China has gradually declined. At present, there is still a gap in coal supply. With the subsequent consumption falling, coal supply and demand will be gradually relaxed. It is expected that the coal storage in power plants will further increase, and the coal price will remain high in the short term.