SunSirs: Demand Is Cold and Expectations Remain Solid, the Game in China Thermal Coal Market Continues

The core contradiction in the current thermal coal market is the intense game between "weak reality" and "strong expectations". This determines that the market will be in a volatile adjustment pattern in the short term. The "CCTD Bohai Rim Thermal Coal Spot Reference Price" for three specifications of 5,500K, 5,000K, and 4,500K respectively closed at 817 RMB/ton, 725 RMB/ton, and 633 RMB/ton, up 8 RMB/ton, 8 RMB/ton, and 6 RMB/ton on a daily basis, setting a new high for the year.

There is a price but no market: Although port quotations are firm, downstream acceptance is low, and counteroffers and price pressures are common, making actual transactions difficult. This is the most authentic portrayal of the market.

Demand is eroded by high prices: The rapid rise in coal prices has led to losses for downstream non electric enterprises (such as coal to methanol), which have responded by reducing production loads, directly weakening the real coal consumption.

Speculative demand is receding: Traders are becoming more cautious in their operations, with some choosing to take profit and ship, exacerbating short-term selling pressure in the market. The accumulation of port inventory also confirms the decreasing enthusiasm for shipping.

Supply side: On the surface, mainstream coal mines provide "guaranteed" supply to maintain stable production during the peak winter season. It means that the elasticity of the supply system is decreasing, and any slight change (such as major safety accidents or increased inspection efforts) may quickly change supply expectations, becoming a reason to ignite the market.

Demand side: The losses of downstream enterprises are expanding. This means that the current high coal prices have exceeded the cost bearing capacity of many downstream industries, and the sluggish demand is not only a "resistance emotion", but also a reality of "inability to purchase". Unless coal prices fall back to a reasonable range, this part of industrial demand will continue to be sluggish.

Inventory changes: The accumulation of inventory indicates that the "out quantity" (real consumption+speculative hoarding) at the current price level is less than the "in quantity". This is direct evidence of the shift towards loose market supply and demand, which has increased the short-term downward pressure on prices.

Short term (until late November): "reality" dominates, with weak fluctuations.

Weak transactions, downstream losses, and traders' willingness to ship will collectively suppress the market. Coal prices are facing high pressure for correction, with an expected fluctuation range of 10-20 RMB/ton. The core task of this stage is to "squeeze out the water" and squeeze out the speculative premium in the early rapid rise.

This round of adjustment is an inevitable correction for the "ultra-high prices" in the thermal coal market. Although the support of long-term fundamentals (tight supply, winter demand) still exists, we must face the reality of "high prices suppressing demand" in the short term. It is recommended that all market participants lower their expectations, move away from the previous "unilateral rise" mindset, and switch to a "high-level oscillation" operating mode, in order to respond to the current market with more cautious and flexible strategies.

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