Power coal prices continue to decline the driving force!

At present, the fundamentals of power coal are still in the situation of overstocking, but there are a number of short-term favorable factors in the market, and the driving force of power coal price continues to weaken. On November 28, the benchmark price of medium and long-term contracts remained unchanged. The general office of the national development and Reform Commission issued a notice on promoting the signing and performance of medium and long-term contracts for coal in 2020. The benchmark price of medium and long-term contracts for water coal in 2020 shall be determined by both parties according to the market supply and demand or shall continue to be implemented at the level of 2019 (535 CNY/ton). If the annual benchmark price remains unchanged, the green range of power coal price fluctuation in 2020 will still be 500-570 CNY/ton, which will be the reference standard for the quarterly, monthly and long-term contract price of power coal in 2020. Therefore, the previous rumour that the benchmark price of medium and long-term water coal contract will fall to 520 CNY/ton in 2020 has been falsified, which also corrected the market's expectation for the future falling space of power coal futures price.

Although the power coal futures market in late November once again accelerated the downward trend, but after the annual benchmark price was determined without forced adjustment, the market bearish atmosphere turned weak. Since late October, coal mines in Shaanxi, Shanxi, Sichuan, Guizhou and other places have had accidents and caused casualties. For this reason, the State Administration of coal mine safety issued the notice on carrying out the centralized management of coal mine safety, which started from November 27 and lasted for three months. The renovation window mainly covers the coal mine production peak in December and the traditional production off-season from January to February next year. It is predicted that the output of raw coal in December may be slightly lower than that of the previous month, which will support the coal price of the production area. However, at present, the coal inventory of northern ports is high and stable, the number of anchor ships is small, and the price of Bohai power coal is still weak. The firmness of the coal price in the production area needs to be transmitted to the lower reaches, and the purchase demand in the lower reaches needs to pick up obviously, as well as the resulting decline of the coal inventory in the northern port. The latest data of better than expected winter coal demand shows that PMI of China's Caixin manufacturing industry rose 0.1 percentage point to 51.8 in November, higher than the market expectation, the highest since 2017.

Earlier, China's manufacturing PMI in November released by the National Bureau of statistics also rebounded significantly from last month, and rebounded above the boom and bust line for the first time after being below the boom and bust line for six consecutive months. The manufacturing PMI of the two dimensions was in good condition in November, indicating that the downward pressure of the manufacturing industry in the year was gradually eased under the counter cyclical policy regulation. In response, the growth rate of electricity consumption picked up and the coal consumption of the power plant increased. In October, the year-on-year growth rate of electricity consumption of the whole society rose 0.62 percentage points to 5.03% compared with that of the previous month, which is the fourth month in a row. It is expected that the data of electricity consumption in November to be released will continue to recover. Since November, the average daily coal consumption of major power generation groups in coastal areas has continued to rise, and exceeded the upper edge of the historical fluctuation range in the same period.

In the face of the interference of multiple factors such as the increase of trans provincial and trans regional transmission power and the decline of power consumption growth in coastal areas, the daily average coal consumption of sample power plants in coastal areas still recorded good performance, indicating that the national coal demand is better than expected this winter. However, the current national key power plant coal inventory is up to 99.33 million tons, higher than the same period of the previous year, the highest level since records. The increase of coal consumption beyond expectation only alleviates the inventory pressure on the margin, but it can not quickly reverse the weak pattern of power coal market in the short term. To sum up, due to the weakening driving force of continued downward movement, the short-term rebound of power coal futures failed to break down the lowest point of the whole year set on November 6 in the near future. It is expected that the 540 CNY/ton integer gateway will become the key support for the main contract price of power coal futures in winter, but the rebound range in the future will depend on the demand of power coal in this winter and the degree of depolarization of coal inventory in the middle and lower reaches 。