Recently, the price of thermal coal in the market has shown a trend of first rising and then falling, and the peak season is not prosperous. The following is a summary and outlook of the market situation:

The market has experienced significant fluctuations. From the first half of the year to mid November, prices continued to rise. Taking Qinhuangdao Port's 5,500 kcal thermal coal as an example, its price climbed from 621 RMB/ton on July 1 to 834 RMB/ton on November 12, an increase of 34.3%. The main factors driving the rise are tight supply-demand balance, traders hoarding goods, and winter heating expectations.

However, since late November, prices have entered a rapid downward trend. As of December 10th, the price of thermal coal of the same specification in Beifang Port has fallen to the range of 770-778 RMB/ton, a decrease of about 6-7% from the high point in November. The market is showing a continuous downward trend.

The price correction this time is mainly caused by the following factors:

1. Adequate supply: With the support of stable production and supply policies in China, coal production has been guaranteed, and the production capacity affected by safety and environmental inspections in the early stage has also been restored. At the same time, the increase in coal transportation from Xinjiang and the import of coal with price advantages have jointly supplemented the market supply.

2. Weak demand performance: Since the beginning of winter this year, the overall temperature has been warmer, resulting in a lag in the peak of heating electricity consumption, and the daily consumption of thermal power has declined year-on-year. In addition, the increase in new energy generation output has further squeezed the space for thermal power. The inventory of downstream power plants is at a high level, and the demand for coal procurement in the market has dropped to freezing point, mainly relying on long-term contracts.

3. Continuous accumulation of inventory: Coal inventory in major ports has rebounded for several weeks, especially in the core port area around the Bohai Sea where the pressure of accumulated inventory is evident. As of early December, the total inventory of thermal coal in the sample port has exceeded 66 million tons. The high social inventory has exacerbated the pattern of loose market supply and demand.

4. Weakening market sentiment: After coal prices rose to a high level in the early stage, downstream acceptance was limited. With the downward trend in prices, the mentality of "buying up and not buying down" has led to a strong wait-and-see attitude in the market, resulting in low trading activity. Some traders have increased their willingness to ship due to financial pressure, further driving down prices.

Overall, there is limited room for further decline in the price of thermal coal, but it is also difficult to rebound significantly in the short term.

The bottom support is strong, and the probability of falling below 700 RMB/ton is extremely low: as some coal mines stop production in mid to late December to complete annual tasks, there will be a marginal contraction in supply. Meanwhile, the expected cold wave weather will boost the demand for heating electricity and provide support for coal prices. Industry analysis generally believes that the bottom range of this round of price adjustment will be around 750-770 RMB/ton.

The upward space is limited, and it is difficult to break through 800 RMB/ton: Despite the expectation of a cold wave, the possibility of a warm winter this year still exists, and the daily consumption of power plants is unlikely to experience explosive growth. In addition, terminal and port inventories are still at a high level, and there is insufficient demand for centralized large-scale replenishment of power plants. Therefore, even if the price rebounds, its magnitude will be limited, and it is expected that the rebound height will be difficult to exceed 800 RMB/ton.

The current thermal coal market has shifted from tight supply to loose supply and demand. Although short-term prices are still under pressure, they are expected to gradually stop falling and stabilize in the future, supported by factors such as cost, demand resilience, and supply margin contraction. The future coal price is likely to fluctuate within the range of 750-800 RMB/ton. Market participants need to pay close attention to changes in the supply of origin, the driving effect of actual temperature on daily consumption, and the digestion of port inventory.

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