Prospect of Coking Coal Market in 2019

In 2019, when the structural reform on the supply side continues to deepen and the goal of "consolidation, enhancement, promotion and smoothness" is shifted, what is the trend of China's coking coal market? How to accelerate the process of transformation and upgrading in the stable operation of coal-coke steel industry chain? On April 11, the International Coking Coal Resources and Market Summit Forum (9th session) was held in Beijing, hosted by China Coal Resources Network. Leaders, experts and representatives of well-known coking coal enterprises, steel plants, coking plants, coal traders and logistics enterprises from the government, industry associations and research institutions jointly discussed the hot topics of international coking coal resources and market. The periodicity of coal industry is strong, and the prosperity of coal industry is closely related to the macroeconomic development. As for the macroeconomic situation in the medium and long term in 2019, Deng Yu-song, deputy director of the Market Economy Research Institute of the Development Research Center of the State Council, said that after 2012, China's economic structure has undergone significant changes, with the proportion and contribution of service industry exceeding that of industry, and the overall economy has entered a stage of medium and high-speed growth. From the perspective of the trend of economic structure change in developed economies, China is in the initial stage of a new round of economic restructuring, and the labor and financial resources of the secondary industry are being allocated to the tertiary industry. In this process, the slowdown of China's economic growth is a natural phenomenon. Under the fundamental trend of economic structure change, steel consumption entered the peak plateau area, but in 2017 and 2018, steel demand increased. Shi Hongwei, deputy secretary-general of China Iron and Steel Industry Association, said that in 2018, China's crude steel output was 930 million tons, an increase of 57 million tons over the same period last year, and crude steel apparent consumption was 870 million tons, an increase of 64 million tons over the same period last year. The rise is due to the strong support of large-scale infrastructure.

In 2019, China's GDP growth target is 6% to 6.5%. The government's work report clearly points out that it plans to arrange local government special bonds of 2.15 trillion yuan to complete the railway investment of 800 billion yuan; highway and water transport investment of 1.8 trillion yuan; in the further promotion of new urbanization, it will continue to promote the construction of affordable housing and the transformation of urban shantytowns; renovate water, electricity and gas supporting facilities; and in the promotion of stable growth of consumption, it will stabilize steam. Car consumption will continue to implement preferential policies for new energy vehicles purchase; at the same time, we will deepen the reform of value-added tax, reduce the current 16% tax rate in manufacturing and other industries to 13%, and reduce the current 10% tax rate in transportation, construction and other industries to 9%.

Based on the above policy priorities, Shi Hongwei said that in 2019, China's iron and steel industry is expected to have basically stable demand, and infrastructure investment will be improved. As a result, the demand for iron ore and coke in iron and steel industry is basically stable in theory, but considering the substitution effect of scrap and the decreasing trend of total steel demand in the future, China's demand for iron and Coke will decline by 2020. However, considering environmental factors, the demand structure of Coke will change, and the demand for high quality coke will rise in steel enterprises in the future.

Steel coking and decay. In recent years, the improvement of benefits of iron and steel industry has directly led to the overall situation of the upstream coking coal and coking industry. Liu Xinhua, deputy general manager of Fenwei Energy, recalled the coking coal market in 2018, saying that steel production had reached a new high, coke production growth led to increased demand for coking coal, while supply-side coking coal production had limited increase and supply-demand was tight. The price of steel coke is high, and the price of coking coal is high and firm. The average price of high quality coking coal in the whole year is obviously higher than that in the previous year.

A detailed analysis of the coking coal market situation in 2019 was made by Liu Xinhua from the aspects of policy, supply, demand, import and export. She said that in 2019, the supply and demand of coking coal increased steadily and the tight supply situation improved slightly, but the structural contradiction between supply and demand intensified, and the supply of low-sulfur and strong-bonded hard coking coal remained tight; security supervision, Environmental Protection Enforcement continued, major activities and conferences continued. The supply, demand and transportation of coal coke are affected by stages, and the policy of coal import restriction is further strengthened, and the import volume continues to decline slightly. The above factors will form a strong support for domestic coking coal prices, especially high-quality hard coking coal. Coking coal prices are expected to remain high in 2019, with annual average prices rising slightly. The average price of coking coal is expected to rise to 1627 CNY/ton in 2019, up 13 CNY/ton from 2018. In view of the supply and demand situation of coking market in China in 2019, Cui Pijiang, president of China Coking Industry Association, believes that the overall supply and demand will be basically balanced, and the situation of partial regions and time periods will be tight. Whether the output and operation benefit of coking enterprises are good or not is still determined by the output and operation benefit of iron and steel. Cui Pijiang said that although China's iron and steel production and steel consumption have entered the peak plateau area, and the overall downward trend. However, in the foreseeable 10 to 20 years, China will remain a major producer and consumer of steel and coke, and the development of coal-coke steel industry will not decline sharply in the short term. Moreover, although the global economic recovery has been slow but still maintained a positive growth, the fundamentals of China's steady economic development have not changed. In particular, the "one belt and one way" initiative has been welcomed by more and more countries. The implementation of iron and steel production cooperation will create certain opportunities for survival and development of coke demand.

Cui Pijiang also emphasized the unfavorable factors that should be paid attention to in the development of coking industry. Sino-US trade frictions will have a certain impact on China's economy; the downward pressure of China's economy is more obvious, and the differentiation and adjustment of enterprises will continue to evolve; the restrictions of environmental governance and logistics transportation will have a fluctuating impact on the balance of supply and demand in the coal-coke steel industry market; the consumption of scrap steel for electric furnace steel and converter steel. Continuous increase is bound to reduce coke demand.