Electricity demand in the first three quarters is still relatively weak. By the end of August, the cumulative growth rate of electricity consumption in the whole society had fallen back to 4.45% year on year. As the manufacturing PMI is still in the contraction zone, the cumulative growth rate of electricity consumption in the secondary industry has fallen back to around 3% year-on-year. In addition, influenced by the El Nino phenomenon, the water supply in the major catchment areas is relatively abundant. In the 1-8 months, the hydropower generation volume grew by 9.3% year-on-year. Meanwhile, with the centralized operation of nuclear power units in coastal areas in 2018, the power generation of nuclear power still maintains a growth rate of over 20%. Under the impact of clean energy, thermal power generation in the second and third quarters showed a year-on-year decline in most months. In particular, the daily coal consumption of the six coastal power plants is significantly weaker than that of the same period last year. Since August, the high temperature weather in southeastern coastal provinces has promoted the ratio of residential power consumption to environmental protection. At the same time, the flood discharge of the hydropower station caused by the typhoon will suppress the hydropower to a certain extent. Daily consumption of power plants in coastal areas has gradually recovered, slightly higher than the same period last year, which has led to a rebound in spot price of power coal. However, the environment in which the daily consumption of power plants is weak has not been reversed. On the one hand, the seasonal off-season is approaching, and the daily consumption of major power plants has fallen to the level of 600,000-650,000 tons this Saturday. At the same time, in recent years, the intensity of environmental protection and production restriction of industrial enterprises in North China has been improved, which is not conducive to the release of industrial electricity demand. On the other hand, from a trend point of view, the manufacturing industry has not yet shown signs of stabilization and recovery, and the demand for electricity and coal consumption in the fourth quarter of this year is also difficult to say optimistic. Short-term supply of fluctuates, but the total quantity is still abundant.
Since mid-September, the power coal supply end has also been disturbed by many factors. In September 15th, the maintenance of Daqin line was officially launched, and the daily average railway volume of the port was reduced from 550 thousand tons to 450 thousand -50 tons. In addition, the recent upstream coal mine control of pyrotechnics is more stringent, to a certain extent, limiting the release of power coal supply. However, the short-term fluctuations in the supply of power coal did not change the overall pattern of sufficient production. By August, raw coal production had increased by more than 5% year-on-year. At the same time, from the regional structure of supply, the increase of raw coal output in the main production areas of Shanxi, Shaanxi and Inner Mongolia is the main factor for the increase of supply. The proportion of the main production areas in the national output has gradually increased to more than 71%, and the release of advanced production capacity is more stable.
Prudential coal price of power plant replenishment is still under pressure
Looking forward to the fourth quarter, the biggest supporting factor for power coal price is early winter storage purchase downstream. In September-October 2018, the advance storage of coal in power plants also has a significant pull on the price of power coal. As of September 23, the six coastal power plants had a total coal stock of 15.75 million tons, with a usable day of 25.88 days. This inventory level has fallen from August's high, basically in line with the same level in the same period last year, and will indeed give the market winter storage expectations. However, it is worth noting that in the environment of relatively weak demand, the inventory strategy of power plants is also different from that of previous years. The replenishment efforts are relatively prudent, and in the condition of long-term and abundant volume, the spot procurement is mainly based on low-cost replenishment of supply. The prudent replenishment attitude of downstream is also reflected in the change of port inventory. Even though the maintenance of Daqin line has restrained the transfer volume of the port railway, the coal inventory of the ring port has been on the rise in the past week. The core factor also lies in the weakening of downstream pulling willingness caused by the fall of seasonal demand. The number of anchorage vessels in Qin Port has dropped sharply from about 30 in early September to about 15. With the completion of the Daqin Line overhaul in October and the recovery of the origin supply, it is still possible for the port stock to rise further and suppress the port coal price.
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