Since the beginning of November, the futures prices of rebar and hot-rolled coil have basically remained stable, indicating that the logic of weakening demand has not been significantly reflected in the futures market. Therefore, the core contradiction of this round of significant decline in the futures market may be focused on the incremental supply of imported coal.

Recently, both the spot and futures prices of coking coal have shown a significant adjustment. Among them, the 2601 contract has the largest decline, followed by the distant contract; the spot market performance of Mongolian coal is relatively weak, the decline of thermal coal is the smallest, and Australian coal is strong against the trend. The mainstream logic analysis of the market for this round of coking coal decline can be summarized into the following three points:

The first is the pressure of warehouse receipt delivery. In recent years, coking coal has often shown a discount delivery feature. Taking the example of the Mongolian 5 warehouse receipt, based on the current port price of 952 RMB/ton of Mongolian 5 raw coal, the theoretical warehouse receipt cost is about 1050 RMB/ton, but the 2601 contract is still about 100 RMB/ton discount. This is mainly because the delivery warehouse receipt is not a single Mongolian 5 washed coal, but a mixed product of other coal varieties. This kind of warehouse receipt is not cost-effective for the user, and even needs to increase the handling cost, resulting in low willingness of the buyer to take delivery, forming a delivery discount. When the supply and demand are not particularly tight, this phenomenon is magnified, forming a "short squeeze long" pressure on the trading platform.

Second, the combination of increased Mongolian coal volume and reduced hot metal production. Since November, the customs clearance volume of Mongolian coal has increased significantly. The average weekly number of customs clearance vehicles at the three ports is close to 14,000, a 58% month - on - month increase, far exceeding market expectations. The previous logic of structural shortage of Mongolian No.5 coal has been reversed. At the same time, downstream hot metal production has been continuously decreasing. With the weakening of rigid demand, the demand for replenishing inventories has also significantly declined. There was a round of centralized procurement in the downstream in October, but after entering November, the willingness to store coal for winter declined significantly. Coking enterprises even reduced their inventories against the season. The decline in coking coal prices further exacerbated the wait - and - see sentiment, delaying the inventory replenishment process. Under the situation of increased supply and decreased demand, coking coal inventories have accumulated significantly, and most of the inventories have accumulated in upstream coal mines, prompting coal mines to reduce prices for promotion.

The third is dragged down by the weak power coal market. After the winter, the national temperature is generally higher, the daily consumption is weak, and the year-on-year growth rate of thermal power generation has turned negative. Metallurgical coal and other coal-related varieties such as methanol and ethylene glycol have all declined to varying degrees.

I believe that the above three factors all have an impact on the futures pricing of coking coal, but the extent of their impact is worth questioning.

Firstly, from the warehouse receipt perspective, based on the estimate of the Mongolian 5 refined coal warehouse receipt, at the high point of 13,18 RMB/ton for the 2601 contract in early November, the futures-spot price was close to par. Currently, the futures discount is about 100 RMB/ton, and the basis change has brought about a decline of about 100 RMB/ton.

Secondly, from a fundamental perspective, iron water production has declined by about 19,000 tons per day from the beginning of November to today, and if this trend continues, it is still possible to maintain above 23 million tons per day by the end of December. Moreover, the recent improvement in steel mill profits reduces the risk of a significant collapse in iron water production in the short term. Since November, coking coal has accumulated about 2.4 million tons, and if the subsequent supply remains flat and iron water production drops to 23 million tons per day, it is expected that the accumulation in December will be 2.7 million tons, and the year-end inventory will be about 40 million tons, still 10 million tons lower than last year. However, the current spot price is basically the same as last year, indicating that the spot valuation is low. On the supply side, the recent domestic and foreign price spread has inverted, causing the import window to close, and the subsequent import of seaborne coal may be reduced. Domestic production is usually weak at the end of the year, and the growth space for Mongolian coal is limited. Therefore, the supply side is still expected to be weak in the short term, and the accumulation may not meet expectations.

Finally, from the logic that the decline in thermal coal drives the decline, since August, the spot ratio of coking coal to thermal coal has fluctuated around 1.73, rising to 1.77 at the beginning of November, and is currently falling back to 1.7, a decline of about 4%. This indicates that the decline in coking coal is greater than that in thermal coal, so the claim that it is "dragged down" is not fully supported. If we estimate the expected bottom of thermal coal spot at 700~750 RMB/ton and the ratio of 1.73, the corresponding coking coal price is in the range of 1210~1300 RMB/ton, and the impact of the decline in thermal coal price on coking coal price is 0~100 RMB/ton.

To sum up, in the current decline of coking coal futures, the factor of warehouse receipt caused a decline of about 100 RMB/ton, the decline of thermal coal futures led to a decline of about 75 RMB/ton, and the remaining decline of about 205 RMB/ton was caused by the expectation and mood of the weak futures market, accounting for 26.3%, 19.7% and 53.9% respectively. It is worth noting that since the beginning of November, the futures prices of rebar and hot-rolled coil have basically remained stable, indicating that the logic of weak demand has not been significantly reflected in the futures market of finished products. Therefore, the core contradiction of this round of significant decline in the futures market may focus on the increase in imported coal supply. With the decline in prices, the import profit of Australian coal has turned from 155 RMB/ton to a loss, and the import profit of Mongolian coal long-term contract has also narrowed to 190 RMB/ton. The possibility of a decrease in the amount of imported coal is increasing, which may help to alleviate the main contradiction that has been suppressing the futures market.

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