The market of coal is pessimistic after the market contradiction accumulates

Overview of the market situation last week

Last week, the main production area was normal, sales were general, pit inventory slightly accumulated, prices steadily declined. Port imports have increased, purchasing has been inactive due to high inventory and low daily consumption downstream, and prices continue to decline. 

Last week, on the one hand, the expansion of Tanghu Line was completed, the arrival volume increased, the port supply was relatively adequate, and the number of days available for downstream power plant inventory was as high as 28 days, purchasing coal from negative market. On the other hand, Caofeidian Port lowered the contract dry fee by 2 CNY/ton, TRADERS'cost decreased, and the willingness to ship increased. Supply and demand continued to be loose and prices fell slightly. The mainstream quotation of 5500 Daka power coal is 610-615 CNY/ton. It is known that the relevant coal authorities have urged Yulin to increase production and ensure the safety of coal supply in summer, and the supply of Yulin coal mine will be further enhanced in the later period. At the same time, the downgrading of port miscellaneous materials and the expansion of Tanghu Line will play a certain role in promoting the launching of sewage coal, which may be improved. However, the inventory of downstream power plants is too high, and the number of days available for key power plants will increase to 25 days, which will reduce the demand for direct coal procurement. It is expected that the pithead power coal market will be easy to supply and prices will drop steadily this week.

On the port side, in the next 10 days, the average temperature in North China, Huanghuai and other places will be higher by 1-3 degrees Celsius, and residential electricity consumption will increase. However, as the eastern China gradually enters the Meiyu season, the precipitation will be on the high side, the output of hydropower will increase, and the thermal power will be squeezed. At the same time, with the decrease of coal arrival cost, the probability of spontaneous combustion of Mongolian coal increases, and the willingness of traders to ship goods strengthens. It is expected that supply and demand in the port power coal market will remain relatively loose and prices will continue to be weak this week.

Future focus

(1) At present, coal prices in the main production areas are at a high level, and downstream procurement is slowing down gradually. It is reported that the six major power generation groups have recently submitted a joint letter, to which the National Development and Reform Commission has proposed to the coal mine to reduce the annual and monthly long-term covalent price to the Yellow zone. It is expected that large state-owned coal enterprises will take the lead in price reduction in the later period.

(2) The capacity expansion and transformation of Tanghu Railway was completed on 21 January, with an annual increase of more than 100 million tons of coal transportation capacity. The transportation capacity will be increased from 50 million tons to 150 million tons per year, and the coal transportation capacity will be tripled. It is reported that the freight rate of Hu-Zhun Railway has been reduced by 2 yuan per ton since May 25. The freight of Hunan-Caoxi Railway has dropped by 10%(about 16 CNY/ton). Recently, the Huzhou Railway Bureau has cancelled the departure and delivery fare. The freight has been reduced by 2 CNY/ton, and the freight of Hunan-Caoxi Railway has been reduced by 18 CNY/ton. Railway freight charges were reduced by about 20 yuan per ton as a whole, and port incidental charges were reduced by 2 yuan per ton. After this price adjustment, the overall reduction was about 22 yuan per ton. The cost of Mongolian coal shipment to the port has been reduced.