Demand side: Daily consumption due to temperature rise, demand for replenishment of inventory is evident

The weather in East China has turned sunny this week, with temperatures rising to 25-36 degrees Celsius, driving up the daily coal consumption level of power plants. The sustained high temperatures in East and Central China have further increased daily consumption, and coal-fired power generation has achieved year-on-year positive growth. With the gradual recovery of the macro economy, the potential demand for replenishment from end users is beginning to emerge. There is a possibility of a slight rebound in coal prices by the end of this month, based on the trend of accelerated inventory consumption and demand recovery.

Inventory and Supply: Significant destocking at ports, with continued tight supply

Recently, the speed of coal inventory depletion in ports around the Bohai Sea has accelerated, and the current inventory level is only 1.8 million tons lower than the same period last year. Although the total inventory of power plants in the eight coastal provinces is still abundant, it is also 3.4 million tons lower than the same period last year. If the scope of high temperature weather expands, leading to a surge in refrigeration electricity consumption and a rapid increase in daily consumption, the available days for coal storage in power plants will significantly decrease, which may stimulate market sentiment to improve and prompt downstream power plants to accelerate procurement. At present, the total inventory of the eight ports around the Bohai Sea has dropped to 26.7 million tons, hitting a three-month low. The main production areas are affected by strict safety and environmental inspections and the decline in coal prices, which has weakened the enthusiasm of traders for shipping and maintained a tight market supply pattern. Given the low possibility of coal mine production increase before the end of the month, the situation of resource scarcity is expected to continue.

Market situation: A tug of war between long and short factors, with narrow fluctuations in prices

This week, the port thermal coal market has remained deadlocked. The supply of low calorific value coal (low calorie coal) is relatively tight, and the price performance is relatively firm; However, due to insufficient procurement demand, the quotation for high calorific value coal (high calorie coal) is under weak pressure. The current demand release mainly focuses on the fulfillment of long-term contracts, and the actual trading activity of coal in the market is limited. Market participants have significant differences in their judgments on the future market: some traders believe that downstream procurement is weak and bearish on future coal prices; Some traders are actively raising prices due to the shortage of low calorie coal resources in ports. The strategy of replenishing inventory for terminal power plants is generally cautious, as reflected by the 10 RMB/ton reduction in pearl electricity prices at ports in South China. The overall pattern of abundant domestic supply is difficult to change in the short term, and the market's expectation of price increases during the traditional peak season has significantly cooled down. It is expected that coal prices will continue to maintain a narrow range of fluctuations in the short term.

Outlook for the future: Limited gains during peak season, with extreme weather becoming a key variable

Overall, before the peak of the "peak summer season", it is difficult for terminal demand to be released on a large scale due to factors such as low expectations of policies to boost industrial electricity consumption and the resurgence of imported coal price advantages. Therefore, even if coal prices rebound, the magnitude will be limited, making it difficult to form a strong upward trend. However, if extreme and sustained high temperatures occur in the future, stimulating an unexpected increase in daily consumption, it may trigger a temporary concentrated replenishment market. In the future, it is necessary to continue to closely monitor the implementation of policy guidance, actual high temperature intensity, and terminal procurement demand.

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