Next year, coal supply may grow faster than demand

Although the current coal price negotiation has entered a critical period, the word "stable" seems to be more in line with the expectations of all parties. Not long ago, 11 coal enterprises, including the state energy investment group, made a joint "voice" and proposed to ensure supply and price stability. China Coal Industry Association has always stressed that "the coal medium and long-term contract system and the pricing mechanism of" base price + floating price "have become the ballast and stabilizer for the stable operation of the coal industry". It is not difficult to see that price stabilization plays a positive role in building a harmonious and win-win community of common destiny for upstream and downstream coal power enterprises.

Increasing supply, cooperation and transportation capacity are all measures taken to promote the stability of coal price. " Liu Xinhua, deputy general manager of Fenwei energy, analyzed at the 7th international power coal resources and Market Summit Forum recently. She said that since this year, with loose coal supply and guaranteed transportation capacity, as well as imported coal replenishment, downstream enterprises have high inventory operation, and spot prices have entered the "green range". Since 2016, China has vigorously promoted the structural reform of coal supply side. After three years of hard work, it has completed the target task of coal capacity reduction in the 13th five year plan ahead of schedule. Statistics show that from 2016 to 2018, China has shut down and withdrawn 700 million tons of coal production capacity. In 2019, it is expected to shut down and withdraw and reduce the production capacity (impact the ground pressure coal mine) by a total of 104 million tons, completing the task of eliminating 800 million tons of backward coal production capacity formulated in the 13th five year plan in advance. Since 2019, China's coal industry has changed from "total capacity reduction" to "structural capacity reduction and systematic capacity optimization".

The pace of approval of new construction, reconstruction and expansion projects has been accelerated. 83% of the newly approved projects are located in Inner Mongolia, Shanxi Province, and 73% are power coal. The growth rate of fixed asset investment continued to accelerate, and the coal industry entered the capacity expansion cycle. High quality production capacity has been gradually released, and coal production has picked up rapidly. According to Zhang Hong, Secretary of Discipline Inspection Committee of China Coal Industry Association, the basic balance of supply and demand in the market has been achieved by effectively dissolving coal excess capacity. In the first 10 months of this year, China's raw coal output reached 3.06 billion tons, a year-on-year increase of 4.5%; coal import reached 280 million tons, a year-on-year increase of 9.6%. However, the national coal consumption only increased by 0.8% year on year, so the coal supply is generally loose. With the development of supply side reform, the operation of coal market presents new changes and characteristics. In response, Lu Yanchun, director of the price monitoring center of the national development and Reform Commission, pointed out that China's coal production has maintained a positive growth for the third consecutive year, and the coal price has accelerated to return to a reasonable range.

The long-term contract system and the pricing mechanism of "base price + floating price" established in 2017 have become the ballast and stabilizer for the stable operation of the coal industry. "Over the past three years, the price of medium and long-term contracts has been stable between 550 yuan and 570 yuan per ton," Zhang said He said that more than 70% of this year's electricity and coal contracts are from China long association, of which there are not a few three-year long association contracts, with the basic price of 535 yuan per ton. From the situation in the previous three quarters, the performance rate is more than 90%. Liu Xinhua said that next year, the power coal supply capacity will continue to improve, the railway transportation capacity will increase, the coal import will remain high, the supply growth rate will be faster than the demand growth, the supply will continue to be loose, and the market-oriented electricity price mechanism will suppress the medium and long-term coal price, and it is expected that the price focus will continue to move downward. According to Liu Xinhua, the marginal impact of environmental protection on supply and demand is weakened. She analyzed four reasons. First of all, the key regions continue to implement the total coal consumption control.

According to the three-year action plan for winning the blue sky Defense issued by the State Council, by 2020, the proportion of coal consumption in the country's primary energy consumption will be reduced to below 58%, the total coal consumption in Beijing, Tianjin, Hebei, Shandong and Henan provinces (municipalities directly under the central government) will be 10% lower than that in 2015, the Yangtze River Delta will be 5% lower, and the Fenwei plain will achieve negative growth. Secondly, the state actively promotes the management of bulk coal in Beijing, Tianjin, Hebei, the surrounding areas and the Fenwei plain, and promotes the clean heating in the northern areas. Electricity, gas, coal and heat are suitable. Secondly, the effect of bulk coal treatment is significant, but the challenge still remains. According to the Research Report on comprehensive treatment of bulk coal in China (2019), in 2018, the consumption of bulk coal in China will be reduced by 60 million tons, of which 72% will be in the industrial sector and 28% in the civil sector. It is estimated that the bulk coal reduction will be about 45 million tons in 2019. After the bulk coal treatment enters the deep water area, the treatment difficulty increases. At the end of 2018, 810 gigawatts (80%) of coal-fired units in China have completed ultra-low emission transformation. By 2020, the coal-fired units with the transformation conditions will have to complete the ultra-low emission transformation. Enterprises continue to increase investment in environmental protection, reduce emissions, and the marginal impact of environmental protection on both sides of coal supply and demand is weakened. "