Thermal coal: The price is still fluctuating and strong before the supply and demand situation has changed

1. The supply side is gradually improving, but the output is still slow to release

The growth rate of coal production this year has slowed down significantly. From January to August, the country’s cumulative coal production was 2.597 billion tons, an increase of 4.4% year-on-year, and the growth rate was down 0.5 percentage points from the previous month, a decline for six consecutive months. In August 2021, the national coal output was 335 million tons, an increase of 2.9% year-on-year, an increase of 6.71% month-on-month, and the year-on-year month-on-month increase from negative to positive. This year, the new domestic coal production capacity is limited, and factors such as safety inspections and frequent accidents frequently disturb the start of coal mine production. Inner Mongolia’s “20-year back inspection” has a greater impact, and Inner Mongolia’s coal production has fallen to the second place in the country. The problem of coal mine overproduction has been well rectified, and a large amount of off-balance sheet coal production has disappeared. Therefore, the release of coal production this year is not as expected, resulting in a tight supply situation.

The supply side is gradually improving, but the output is still slow to release. Beginning in July, the National Development and Reform Commission and the Energy Administration have jointly carried out energy supply and price stabilization work, and related policies for increasing production and supply have been released one after another, and the coal supply level of producing areas has gradually increased since August. Since September, the work of ensuring coal supply in producing areas has continued to advance, and the output has increased from the previous month. CCTD coal market network key monitoring data show that since September, the average daily output of Ordos is 1.98 million tons, an increase of 30,000 tons per day from August, but it is far lower than last year's 2.3 million tons during the guarantee period. During the National Day period, some coal mines have plans for maintenance and holiday, and short-term supply is difficult to improve. After the National Day, the release of coal mine production capacity may accelerate, but at the end of the year, it is also trapped by factors such as safety supervision and strict environmental protection. The expectation should not be too high.

Second, the supplementary role of imported coal is limited

Since June, the domestic customs has liberalized the control of imported coal (except Australian coal) to the greatest extent, and the policy level has also encouraged power plants to purchase more imported coal. Under the guidance of the national policy of ensuring supply and stable prices, the country’s coal imports have been imported for three consecutive times. The month-on-year increase was seen, among which the increase in coal imports in August further expanded year-on-year. Data show that in August 2021, my country imported 28.052 million tons of coal, an increase of 7.389 million tons or 35.76% from the 20.663 million tons in the same period last year. Compared with the 30.178 million tons in July, a decrease of 2.126 million tons, a decrease of 7.04%. From January to August of 2021, my country imported a total of 19,788,800 tons of coal, a year-on-year decrease of 10.3%, and the rate of decline narrowed by 4.7 percentage points compared with the previous July.

Due to the tension between China and Australia, Australian coal imports are still restricted, while imports from other countries have basically increased. According to the data, the source countries that imported more coal this year include Indonesia, Russia, Mongolia, the Philippines, Canada, the United States, South Africa, and Colombia. From January to August this year, my country's coal imports from Indonesia reached 121.86 million tons, a year-on-year increase of 19%. The amount of coal imported from the United States increased by nearly 673% year-on-year, and the amount of coal imported from Colombia increased by nearly 175% year-on-year. The amount of coal imported from South Africa has soared from 0 tons last year to 4.38 million tons. The amount of coal imported from Canada, Russia and the Philippines increased by 67%, 62% and 49% year-on-year respectively. However, from January to August this year, my country's coal imports from Mongolia dropped by 20% year-on-year, mainly due to the severe impact of the Mongolian epidemic situation.

However, the supplementary role of international coal is limited. The international coal market demand is exceptionally strong this year, offshore quotations of foreign mines are high and firm, coupled with the continuous increase in international sea freight prices continue to push up the CIF cost of imported coal, which has caused the CIF price of imported coal in China to be inverted, and domestic terminal import purchases have been released. After two consecutive months of growth in imports, there was a slight decline in August from the previous month.

In addition, the supply of goods from major importing countries is tight. Due to frequent rains, Indonesia's coal mines have reduced production, transportation is not smooth, and loading is slow; coupled with strong domestic demand, the government requires domestic supply to be guaranteed and coal exports are restricted. Russia's Far East resources are also hard to find, and exports are limited. With high prices in the international coal market, reduced price advantages, and a general shortage of supplies in major coal exporting countries, it is difficult for domestic coal imports to increase on a large scale in the later period. Therefore, the supplementary effect of subsequent imported coal on the domestic market may be weakened.

3. Power demand is strong, and demand relay for replenishment in winter

Power demand was strong in the first eight months, my country’s epidemic situation was properly controlled, the economy was recovering well, and export demand was strong, which drove strong power demand. From January to August, the country’s electricity consumption was 5,470.4 billion kWh, a year-on-year increase of 13.8%. In terms of industries, from January to August, the electricity consumption of the primary industry was 66 billion kWh, a year-on-year increase of 19.3%, accounting for 1.2% of the total electricity consumption of the society; the electricity consumption of the secondary industry was 3652.9 billion kWh, a year-on-year increase 13.1%, the growth rate increased by 13.6 percentage points compared with the same period last year, accounting for 66.8% of the total electricity consumption of the society; the tertiary industry electricity consumption was 953.3 billion kwh, a year-on-year increase of 21.9%, and the growth rate was 22.9 higher than the same period of the previous year. Percentage points, accounting for 17.4% of the total electricity consumption of the whole society; the electricity consumption of urban and rural residents was 798.1 billion kWh, a year-on-year increase of 7.5%, and the growth rate was 1.2% higher than the same period last year, accounting for the proportion of the total electricity consumption of the whole society It was 14.6%.

In August, my country's economy continued to recover steadily, and the electricity consumption of the whole society continued to grow, reaching 760.7 billion kilowatt-hours, an increase of 3.6% year-on-year, and an average growth rate of 6.0% in two years. However, compared with the previous few months, the 3.6% increase was the lowest growth rate this year, 9.2 percentage points lower than in July, and 4.1 percentage points lower than the same period last year. In August, the power consumption of the primary industry was 10.7 billion kWh, a year-on-year increase of 13.7%; the power consumption of the secondary industry was 485.1 billion kWh, a year-on-year increase of 0.6%; the power consumption of the tertiary industry was 140 billion kWh, a year-on-year increase of 6.2% ; The electricity consumption of urban and rural residents was 124.9 billion kwh, an increase of 12.5% year-on-year. With the continuous growth of electricity consumption in all industries, the growth rate of the secondary industry is significantly lower than that of other industries, and it has narrowed significantly. The main reason is the impact of the dual energy consumption control policy, which has imposed direct curtailment policies on high energy-consuming industries. According to incomplete statistics, as of now, the provinces that have advocated orderly use of electricity and initiated curtailment measures are: Yunnan, Guangxi, Guangdong, Jiangsu, Zhejiang, Hunan, Jiangxi, Henan, Ningxia, Inner Mongolia, Anhui, Hebei, etc.

Seasonal demand weakened from the previous month, but it was still relatively strong compared to the same period in previous years. After the fall, residential electricity demand has dropped significantly, effectively alleviating the pressure on power plants and other terminals. CCTD coal market network monitoring data shows that the average daily coal consumption of the 17 inland provinces since September is 3.11 million tons/day, a month-on-month decrease of 620,000 tons/day and an increase of 440,000 tons/day year-on-year; while the eight coastal provinces have terminal coal consumption 2 million tons/day, a month-on-month decrease of 160,000 tons/day and a year-on-year increase of 330,000 tons/day.

The terminal inventory is low, and the demand for replenishment in winter is strong. The ultra-low downstream inventory and the peak winter heating demand are still contradictions that are difficult to resolve in the short term. The inventory of power plants in the eight coastal provinces was over 30% lower than the same period last year. The inventory situation of power plants was relatively severe. The number of days available for coal storage in some power plants fell to single digits. The off-season inventory levels were at a relatively dangerous level and the pressure to replenish inventory was greater. Beginning in September, the process of winter storage in the Northeast has accelerated. Under the background of tight coal procurement, power plants have been enthusiastic about purchasing from the north. At the same time, the Daqin Railway has confirmed that it will carry out autumn intensive maintenance from October 1 to 25, which will affect coal transportation. Coal supply is still tight, and coal prices at the port are relatively supportive.

4. Policy regulation continues

The policy of dual control of energy consumption and electricity curtailment has aroused the market's attention to coal prices, and the control policies for electricity and coal prices are still continuing. On September 21, the National Development and Reform Commission announced that in order to effectively ensure that a series of energy supply and price stability measures introduced by the state have been implemented and achieved results, recently, the National Development and Reform Commission and the National Energy Administration have jointly sent a supervision team to the relevant Key provinces, enterprises, and ports carry out supervision of energy supply and price stabilization. On September 24, the supervision team of the Development and Reform Commission supervised the energy supply and price stabilization work at Qinhuangdao Port. On September 24, in order to further promote the full coverage of medium and long-term coal contracts for power generation and heating, the National Development and Reform Commission organized Shanxi, Shaanxi, Mongolia and relevant coal-producing cities and key coal companies to hold special meetings to arrange medium and long-term coal use for power generation and heating. The contract fully covers coal sources to implement relevant work. After convergence, the medium and long-term contract coal sources for power generation and heating coal in the fourth quarter of this year have all been decomposed into key coal-producing areas. On September 29, Shanxi signed a coal supply guarantee contract with 14 provinces, autonomous regions and municipalities. On September 29, the National Development and Reform Commission mentioned in a reporter’s question on energy supply guarantees this winter and next spring that since the beginning of this year, due to the continuous recovery of my country’s economy and the rising prices of international bulk energy and raw materials, my country’s coal consumption has grown faster than expected, and supply and demand have been tight. . Coal consumption will continue to grow during the heating season this winter and next spring. Coal supply is guaranteed by further increasing production, increasing imports, using reserve resources and social stocks.

Under the implementation of a series of control measures, the tight coal supply situation is expected to be alleviated to a certain extent. This will put pressure on high coal prices and slow down the upward speed of coal prices. In extreme cases, it may even directly change the supply and demand situation.

Five, summary

The current coal supply and demand pattern is still in a tight situation. Although there is incremental release on the supply side, it is not enough to meet the strong demand. Although the demand is in the off-season during the year, it is at a high level year-on-year. The impact of the Daqin line's maintenance plan and other factors have supported the strong fluctuations in coal prices. However, with regard to the economy and people's livelihood, the intensity of policy control is increasing, so the subsequent supply-side increment will gradually expand, coupled with the strict energy consumption control situation, the marginal situation of supply and demand is improving, and the continuous price increase lacks a basis. , May make coal prices peak in the fourth quarter. After the price of the futures continues to rise rapidly, the risk of high prices increases, and there may be fluctuations in the adjustment demand during the period.

Original title: Thermal coal: Before the supply and demand situation has changed, prices are still fluctuating strongly

Source: Wenhua Finance