Changjiang Estuary Stock Sustainable High Coal Price Rebound

The sustained loosening of regional supply or the continued weakness of the basic situation have led to a clear downward trend in the spot market in the medium and long term, while the Yangtze Estuary market, due to its regional characteristics and the structural characteristics of market participants, may be weaker in the downward trend of the current round.

According to the forecast of China Weather Network, in late July, Jiang River Estuary market will be weaker in the downward trend. Huaihe and Jiangnan regions will turn to high temperature and little rain. The daily maximum temperature in some areas can reach 38 to 40 degrees Celsius, and the duration of high temperature can reach 6 to 8 days. In early August, there were still high temperatures in Huanghuai, Jianghuai, Jiangnan and Northern and southern China. The delayed high temperature weather significantly boosted the daily consumption of power plants. Guangdong, Guangxi, Guizhou, Yunnan and Hainan five provinces and regions of the Southern China Power Grid load regulation set a record high. On July 24, 730,000 tons of coal were consumed per day by coastal power plants of the six major power groups, an increase of 125,000 tons from a week ago. Increased daily consumption has triggered a strong price sentiment. Recently, quotations from some traders in northern ports have risen slightly.

For the latter market trend, the author believes that coal prices may rebound in the short term, but the overall downward trend of the price center will not change. The demand for thermal power downstream is basically clear.

It has been agreed that the daily consumption of coastal power plants has been flat since this year. In April, the coal consumption of coastal power plants of the six major power groups has decreased by 5.32% compared with the same period of last year, and in May, the decline has reached 18.9%. Part of the reason for the year-on-year decrease in daily consumption along the coast is that the downward pressure of the economy still exists, and the squeeze of thermal power from foreign electricity and new energy generation is also very obvious. The data shows that in the first half of the year, the cumulative power generation of clean energy increased by 14% year on year, accounting for 27% of the total power generation of the whole society, while the cumulative growth of thermal power generation was only 0.2%. In April and May, the cumulative growth rate of thermal power generation was negative year on year, which was -0.2% and -4.9% respectively. At the same time, due to foreign movies, thermal power generation in coastal areas showed negative growth. In the first half of the year, the cumulative growth rate of thermal power generation was -10.1% in Shanghai, -9.9% in Zhejiang, -10.7% in Fujian and -16.4% in Guangdong. From February to June, Guangdong, Zhejiang, Shanghai and Jiangsu provinces and municipalities imported 204.865 billion kilowatt-hours of electricity, exported 293.39 billion kilowatt-hours of electricity, and imported 175.465 billion kilowatt-hours of electricity, accounting for 23.9% of the total electricity consumption in the four provinces and municipalities. From the end of July to August, the daily consumption of thermal power plants has risen to 700,000 tons or even 800,000 tons, even though there is a persistent hot and muggy weather in the south. From the overall trend of power generation, the growth rate of coal consumption of thermal power in coastal areas in summer is still not optimistic. Foreign electricity and new energy will continue to increase, and the growth rate of thermal power in summer in some coastal provinces may be reduced to - 10%. In addition, the current power plant inventory is still high, the power plant will maintain a certain amount of imported coal supplement, the domestic coal procurement increment is limited, it is difficult to vigorously boost the coal market.

It is expected that the domestic coal market in July and August will continue to maintain the situation of high stocks of power plants, low anchor ships around Bohai Sea ports and low and medium coal prices, and coal prices will not rise substantially. Yangtze Estuary Regional Inventory is at a high level. Although the Northern Port accelerated the de-inventory in June, this part of the inventory has not been absorbed by the market, but transferred to the Yangtze Estuary Regional Port. Data show that on July 19, the total inventory of major ports in the Yangtze Estuary region was 8.35 million tons, a decrease of 340,000 tons compared with a week ago, but the overall inventory is still at an all-time high. The ports in the Yangtze Estuary region have more small and medium-sized end-users than those in the northern ports, and the pricing is more market-oriented. In the context of the increase of regional saleable supply, the downside risk of price is higher.

Since this year, the most important supporting factor of coal price is cost. From the upstream of the chain, the price of origin is still high. On the one hand, the production and supply are affected by many factors; on the other hand, the procurement demand brought about by the action of base storehouse of the end users of origin is released ahead of time.

But with the reduction of factors affecting the production and supply of coal mines, the high-quality production capacity is continuously released and the supply is in a continuous recovery state. The inventory of key power plants in China has also climbed to a year-on-year high. With the subsequent entry into the de-inventory stage, the price of the origin may gradually decline. Considering the price linkage between northern ports and Yangtze Estuary regional ports, when the cost support of northern port market disappears, small and medium-sized traders accumulate in the Yangtze Estuary regional market or face the risk of rapid decline in coal prices.

Expectations for tightening imported coal are gradually increasing

Data show that China imported 28.123 million tons of coal in 2018 and 15.4486 million tons of coal in the first half of 2019, an increase of 5.8% over the same period last year. If the level control is maintained throughout the year, the remaining coal imports in the second half of this year will be 1267.46 million tons.

At the end of 2018, the level control policy of imported coal was basically set. At present, the quota of imported coal in some areas and customs has been basically exhausted. In some areas, the policy of imported coal has been strictly implemented. Some major ports of imported coal have basically used the annual quota in the first half of the year. Domestic TRADERS'expectations of tightening imported coal in the second half of the year have gradually increased, and the imported coal has been strictly implemented. More cautious procurement, coal imports are expected to decrease in the second half of the year.

Generally speaking, regional supply continues to be relaxed or the basic situation continues to be weak. Under the background of ignoring the disturbance of "black swan" incident, the long-term downward trend of spot market has been more clear, while the Yangtze Estuary market, due to its regional characteristics and the structural characteristics of market participants, is under the current trend. In the course or performance is more weak.