Stimulating the New Vitality of Power Coal Market

At the beginning of April, in Ningbo, rainy and rainy, reporters in Liuheng Port, the only designated delivery port for power coal futures in East China, saw that ships and busy workers arriving at the port were working in a tense and orderly manner. As of April 3, Liuheng Port has successfully completed the delivery of 270,000 tons of power coal futures contract 1903, and the remaining 50,000 tons are also completed in the next two days. It is understood that the 1903 contract delivery is the largest contract delivery volume in March since the listing of power coal futures. It is also the largest delivery volume of power coal since Liuheng Port became the only designated port in East China.

Journalist understands that 21 deliveries have been successfully completed since the listing of power coal futures. The total deliveries reached 798.07 million tons. Prior to that, they mainly concentrated on 1, 5 and 9 contracts. From 1803 contracts, 3, 7 and 11 contracts gradually produced deliveries, and the continuous active effect of power coal futures contracts has become increasingly remarkable. In the view of the industry, the smooth delivery of power coal contracts 3, 7 and 11 has further enhanced the enthusiasm of upstream and downstream to participate in hedging, greatly enhanced market participation, and the integration of power coal is now moving to a new stage.

Futures contracts are continuously active to help coal and power enterprises operate steadily

Coal and power industries are continuous production and operation throughout the year. Previously, power coal futures were limited to the active situation of contracts 1, 5 and 9, resulting in a significant reduction in the efficiency of hedging, and the guiding role of futures prices in spot production and operation has been weakened. Continuous and active power coal futures contracts help to improve the efficiency of enterprise hedging. In addition, it is more in line with the international spot trade and derivatives trading habits to guide the dynamic coal futures to continue to be active. For coal producers, the characteristics of long-term and continuous production determine that multi-month contracts in the futures market are more active and can better meet the demand for hedging. "Enterprises have participated in the delivery of power coal futures for many times, which are based on the fundamentals to determine the hedging strategy. In the past, there were fewer contracts in active months of power coal futures, which limited the timing of hedging options. A coal producer in Inner Mongolia told Futures Daily that with the increasing number of active contracts for power coal futures, not only the participation of enterprises that have used futures has been greatly increased, but also a number of new coal producers have been attracted to participate in the futures market. The use of futures as a "stabilizer" of production and operation has been recognized and accepted by more and more coal production enterprises.

A person in charge of an electric power enterprise told reporters about the cases in which he benefited from the continuous and active contract. In mid-April 2018, the spot price of power coal was within the green range of 550-560 CNY/ton stipulated by the National Development and Reform Commission. Considering that July is approaching its peak in summer, the downstream demand will increase, and the price will rise. They lock in the power coal in July and build warehouses in many places. When the contract expires in July, the spot price has risen to 680-700 CNY/ton, while the delivery price is only 550-560 CNY/ton, which can reduce the purchase unit price by at least 120 CNY/ton. At that time, although the electric power enterprise signed a long-term association with coal enterprises, it still needed market coal to supplement some of the vacancies. Gong Ping, senior analyst of power coal in CITIC Anxin Futures, also believes that enterprises can purchase coal resources below market price by using power coal futures tools reasonably, capturing futures market opportunities and locking futures prices in advance, reduce coal procurement costs of thermal power enterprises, effectively deal with the risks brought by rapid changes in the coal market, and improve the operational efficiency of thermal power enterprises.

Market Efficiency Enhances Spot Enterprises'Use of Futures More Convenient

It is known that power coal futures will implement a continuous active program from October 2017, take a variety of incentives and preferential measures to enhance the size and liquidity of contracts in March, July and November, reduce the holding and delivery costs, and introduce futures market makers to provide better liquidity for contracts.

Futures Daily reporter learned that in recent years, the impact of power coal futures on the trade circle around the Bohai Sea and the consumption region of East China has been expanding. Relevant business people believe that, compared with spot trading, futures trading has the advantages of open and transparent price, low negotiation cost between buyers and sellers, and low risk of default. The main body of coal and electricity industry chain participates in the delivery of power coal futures. Firstly, it can expand the purchasing and selling channels and enrich the purchasing and selling modes. Secondly, it can use the characteristics of futures trading and delivery mechanism to establish virtual inventory and reduce the cost of inventory management. Xiaomen Xiangyu Group Co., Ltd., who participated in the delivery of Liuhenggang Power Coal Futures 1903 contract, believes that the whole delivery process is smooth, fair and open.

"Whether the buyer or the seller is ready for delivery, they must do their homework well in advance, such as the situation of anchorage, port, ship type and so on. The delivery is very smooth and the operation is relatively happy. On the one hand, Zheng Shang's on-site supervision during the delivery process achieves all-round service and guidance; on the other hand, after full communication, the buyers and sellers cooperate in a friendly manner within the framework of relevant rules, which reduces the risk of delivery and improves the delivery efficiency. The person in charge said.