The current thermal coal market is in a fierce game of "strong reality" and "weak expectations", showing an overall stalemate pattern of "short-term support, long-term variables". The production market is gradually stabilizing and partially rebounding due to supply constraints, while the port market is heavily cautious due to high prices and weak demand. The focus of the market has shifted from the strong performance in October to the balance between expectations and uncertainty of demand during the peak season in November.

Market situation:

Policy driven supply: The fourth quarter is a critical period for safety production and over production verification. The frequent coal mine accidents in the Shanxi Shaanxi Inner Mongolia region have led to stricter safety and environmental inspections, seriously restricting the release of production capacity. The entry of the safety production assessment and inspection team in November and December will further strengthen this constraint.

Demand has rebounded: After experiencing a phase of price decline, rigid demand (metallurgy, chemical industry) and speculative demand (traders, platforms) have begun to be released, and some coal mines with significant price reductions have seen a queue of coal pulling vehicles, driving a partial rebound in prices.

The port market prices are running at a high level: in October, the price of 5500 kcal coal increased by 67 RMB/ton, a significant increase, and currently remains at a high level of 773 RMB/ton.

There is a price but no market, and trading is quiet: high prices suppress terminal procurement demand, while traders' willingness to take profits increases, leading to a market stalemate and buyers and sellers being in a wait-and-see state.

Inventory structure differentiation:

Northern ports: Although inventory has increased compared to September, it is significantly lower than the same period last year. Due to the inverted shipping prices and the cancellation of railway discounts, the efficiency of coal gathering at ports is low, and port inventory is difficult to accumulate quickly, which provides important bottom support for coal prices.

Southern ports: The inventory situation varies, but overall it is not very high. For example, Guangzhou Port's inventory is lower than the same period last year, which means that there is still potential for downstream replenishment.

Future trend:

The market is waiting for a directional breakthrough, and November will be a key observation window.

Strong supply side constraints: Safety of production areas and environmental inspections are the most certain favorable factors for the next 1-2 months, which will continue to suppress coal supply.

Low inventory buffer at ports: Northern ports have inventory levels lower than the same period, as well as difficulties in port consolidation, which weakens the market's ability to withstand demand fluctuations. Once demand starts, it can easily lead to price increases.

Winter peak season expectation: This is the biggest psychological support for the market. Despite the current decline in daily consumption, the market generally expects that winter heating demand will gradually increase in the context of a "cold winter", and demand may rebound in mid to late November.

Speculative stocking demand: Some traders are optimistic about the future market and stock up when prices fall, forming a support force of "buying down and not buying up".

Comprehensive conclusion and outlook

Short term (next 1-2 weeks): The market is likely to continue the current high-level stalemate pattern. Due to supply issues, the prices in the production area are relatively firm, and the possibility of a deep decline in port prices is unlikely under cost support and low inventory. However, the rise also lacks demand driven factors. The price will mainly fluctuate in a narrow range.

Mid term (mid to late November to December): This is a crucial turning point for the market.

If there is strong cold air, the demand for winter heating will quickly start, coupled with continuous supply constraints, and port inventory will rapidly decline, then coal prices will start a new round of upward trend.

If the weather is mild, demand starts slowly, or hydroelectric output exceeds expectations, then the current high prices will be difficult to maintain. Accumulated profits at high prices may be concentrated for selling, leading to a wave of price correction. The depth of the callback will depend on the cost support of the production area.

Positive factors (supply, inventory) provide flooring, while negative factors (weak demand, uncertainty) limit the ceiling. The core driving force for November will shift from the supply side to the demand side, especially the actual intensity of winter heating demand. Market participants are advised to closely monitor weather forecasts, changes in port inventory, and daily consumption and procurement strategies of terminal power plants.

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