SunSirs: Weak Demand, Narrow Range Fluctuations in China Thermal Coal Market

Market price

On May 8th, the market price of thermal coal (non power plant flow) in northern ports was 5,500CV, 649 RMB/ton (-3); 5,000CV， 569 RMB/ton (-3); 4,500CV， 504 RMB/ton (-3)

On May 8th, the market price of thermal coal (non power plant flow direction) in Jiangnei Port was 5,500CV, 700 RMB/ton (-4); 5,000CV， 616 RMB/ton (-4).

On May 8th, the China Electricity Coal Price Index (CECI Caofeidian Index) was 5,500k, 649 RMB/ton (-4), a decrease of -0.6; 5,000k， 567 RMB/ton (-6), a decrease of -1.1; 4,500k， 502 RMB/ton (-4), a decrease of -1.0.

Price decline factor

Weak demand leads the market: Low power plant procurement: The inventory of coastal power plants remains available for more than 20 days, coupled with an increase in hydropower output (due to heavy rainfall in the Yangtze River Basin in April), the thermal power load rate has dropped to 60% -70%, only maintaining rigid operation.

Dragged by non electric industries: The cement and chemical industries have been affected by environmental restrictions and profit compression, resulting in a 5% -8% decrease in operating rates compared to the same period last year, and a sharp decline in demand for low calorific value coal (4,500-5,000 kcal).

Supply side: High port inventory: The inventory of ports around the Bohai Sea has exceeded 30 million tons (+15% year-on-year), with over 60% of low calorie coal below 5,000 kcal accounting for structural overcapacity suppressing prices.

Long term coal squeezing spot: In April, the long-term contract fulfillment rate increased to 100%, and end users turned to low-priced long-term contract resources, resulting in a continuous decline in spot market liquidity.

3. The impact of imported coal is intensifying

The landed price of thermal coal (5,500 kcal) at Russian Far East ports is quoted at 630 RMB/ton (including tax), which is 35 RMB/ton lower than the domestic spot price, stimulating South China power plants to increase import procurement

Price performance and market sentiment

Narrowing of calorific value premium: The price difference between 5,500 kcal and 5,000 kcal has narrowed from 90 RMB/ton in March to 72 RMB/ton, reflecting a weakening demand for high calorie coal and a decrease in market sensitivity to calorific value.

Differentiation of trader mentality: Some traders have lowered prices and sold goods due to financial pressure, but the available spot goods (5,500 kcal) at the port are only about 500,000 tons, which increases their willingness to raise prices due to cost inversion.

Short term market outlook

Limited downward space: Cost support is evident: the cost line for Shanxi Kengkou 5500 kcal is about 620 RMB/ton, and the port shipping closing price is inverted by 10-20 RMB/ton, further reducing prices or triggering production cuts.

The maintenance of Daqin Line has been completed: after May 1st, railway transportation capacity will resume, and the import volume of Beigang may increase to 1.3 million tons/day, easing the structural surplus pressure of low calorie coal.

Lack of upward momentum: Slow inventory turnover: Based on current daily consumption, it will take more than 2 months for Beigang's inventory to return to a reasonable range, suppressing expectations of price rebound.

Alternative energy suppression: The outflow of the Three Gorges Reservoir in May is expected to increase by 10% year-on-year, and the proportion of new energy generation may exceed 25%, squeezing the space for thermal power.

The thermal coal market is in a transitional stage from "weak reality" to "weak balance", with prices fluctuating narrowly around the cost line (5,500 kcal 640-670 RMB/ton). It is recommended to pay attention to the pace of non electricity demand recovery in May and the speed of inventory turnover in Beigang. If the growth rate of industrial electricity exceeds expectations, there may be opportunities for a temporary rebound in the third quarter.

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