Why are pits and port coal prices hanging upside down in the near future?

Recently, pithead coal price and port coal price have been hanging upside down. According to the estimation of Fenwei Energy on April 23, the cost of transporting power coal (5500 calories) in the "Three West" area to the north is 652 yuan for Shanxi coal, 653 yuan for Mengkou coal and 674 yuan for Shaanxi coal. But the CI5500 index issued by Fenwei Energy on April 23 is 620 yuan, and the cost inversion is 32 yuan, 33 yuan and 54 yuan, respectively.

According to the data of Ordos Mixed Coal Price Index (OSPI) Report No. 275 issued by Inner Mongolia Coal Exchange Center, this situation can also be seen. The pithead price of Ordos 5500 Daka blended coal is 384-390 yuan/T, the plate price is 425-431 yuan/T and the arrival guidance price is 665-687 yuan/T. This price is 45-67 yuan/T different from the spot reference price of 20190 430 CCTD (620 yuan/T for 5500 cards) issued by China Coal Market Network, that is to say, 45-67 yuan/T is inverted between the coal price of ports and pits. Why does this abnormal phenomenon occur in? Generally speaking, the coal price at the pithead will only change with the change of the coal price at the port. The coal price at the port is high, the coal price at the pithead is high, the coal price at the port is low, and the coal price at the pithead will be lowered accordingly. It is abnormal that port coal price and pithead coal price hang upside down. However, this kind of inversion has lasted for nearly 20 days. It seems that it has not exerted much influence on the operation of China's coal market. It seems that this is a normal phenomenon. How to understand this problem? Will such phenomena occur frequently in the future? Any phenomenon will inevitably have its reasons. We believe that the inversion of coal prices at ports and pits for such a long period of time reflects the problem that the coal market in China has undergone significant changes.

1. The area of using coal has changed, and the new area of using coal has been established.

With the transformation and structural adjustment of China's economy, the regional distribution of energy consumption has changed, which has been reflected in the construction of the Menghua Railway. With the deepening of China's reform and opening up, China's economic development has changed from relying solely on coastal provinces to the comprehensive development of all provinces and cities in the country. Especially the implementation of the western development strategy has accelerated the process of this transformation. At present, the growth of energy demand in the central and western regions of China is not confined to the high-energy-consuming industries in the coastal pioneer areas, but has been brought about by the large-scale emergence of new industries and the improvement of people's living standards.

Take Yulin City of Shaanxi Province as an example. In September 2018, Yulin Municipal Committee and Municipal Government issued the "Practical Plan for Promoting the High-end Development of Coal Chemical Industry", and also established a high-end base construction headquarters under the general command of Dai Zhengshe, Secretary of the Municipal Party Committee. China Energy Daily reported that Li Chunlin, mayor of Yulin, said a very vivid sentence when he talked about the excellent conditions and unsatisfactory situation of coal chemical industry development in Yulin: "We grow wheat in our own fields, and now we grind wheat into flour, but flour has not yet been made into cake and bread." Because of this understanding of the local government and the strong support of the Shanxi provincial government, five new coal chemical projects have been added in Yulin on the original basis, with a total investment of 266 billion yuan.

Yulin, Shaanxi Province is only a prominent example. In fact, Zhengzhou, Wuhan, Chongqing, Chengdu, Xi'an and Ningxia in the central region are all evolving into new regional economic centers. Driven by these centers, the economy of these regions is developing at a high speed, so the demand for energy consumption is also growing rapidly. Although the focus of China's economy is still in the southeast coastal provinces, and the focus of energy use is also in the southeast coastal provinces, the proportion of energy use in the total energy consumption of the country has dropped significantly. At present, China produces about 3.5 billion tons of raw coal annually, but only 700 million tons of coal reach the ports around the Bohai Sea, accounting for less than 1/4, accounting for less than 1/3 of the coal transported by railways throughout the country. Therefore, it can be confirmed that new coal-using areas have been formed and will be further expanded. Otherwise, where are all the coal produced by coal mines going when the price of coal hangs upside down at ports and pits and traders don't ship to ports? If the coal produced by the coal mine can not be sold out, how can the coal mine maintain the high coal price at the pit mouth? At present, the price of Jinjitan Mine in Yankuang is 455 yuan/T (6200 calories) and Shirawusu Mine is 450/T (6100 calories), but the coal-pulling vehicles are still waiting in line.

2. The proportion of Changxie coal has been greatly increased, and the proportion of coal in the market has been relatively reduced. The increase of the proportion of Changxie coal is reflected not only in the increase of the actual supply of Changxie coal, but also in the enhancement of the control ability of the enterprises supplying Changxie coal on the supply of market coal. At present, the enterprises supplying Changxie Coal are also selling market coal, and the long-term covenant price and market price are sold proportionally. The main reason why the enterprises supplying Changxie Coal can do this is that they have railway capacity, so these enterprises have cost advantage in logistics compared with pure market traders. For coal-using enterprises, although the market price of coal is higher than that of Changxie Coal, as long as Changxie Coal is guaranteed, the total cost of coal-using enterprises is still lower than that of market coal, so in the current off-season, coal-using enterprises basically do not purchase market price coal from the market, but pull market price coal from enterprises supplying Changxie Coal to themselves. So that the real market coal trading volume is significantly reduced, so that the market coal prices have been kept low. This in turn brings benefits to coal enterprises.