Why did coal prices fall in the second half of the year

In the first half of this year, the port market coal price remained at a relatively high level. At the highest level, at the beginning of March, the coal price had reached 643 CNY/ton; at the lowest level, at the beginning of February, the port coal price was 585 CNY/ton. Most of the time, the port coal price is more than 600 CNY/ton. In the second half of the year, the coal market is in a sharp turn. In the case of high inventory, users are unable to purchase a large number of spot goods. From the middle of July to the end of the year, the coal price has always been running below 600 CNY/ton; especially after the national day, the coal price has been falling all the way from 587 CNY/ton to the end of the year, returning to the green area running below 570 CNY/ton. In November and December this year, it was the peak of coal consumption in winter, and the coal price remained low, hovering between 549-558 CNY/ton. Why did coal prices fall in the second half of the year and the market continue to be sluggish?

Power plant inventory is too high. From July to December, the inventory of the power plant remained high, with more than 20 days available. Even under the influence of many consecutive days of port collapse, railway and port equipment failure, as well as heavy rain and sea closure and other factors, the downstream users are not active in transporting and replenishing warehouses, and the port coal price remains unchanged.

The proportion of clean energy increased. With the increase of purchased power, the power generation of hydropower and UHV is increasing, and the pressure of coastal power plants is decreasing. All provinces and cities in East China have reduced coal consumption in the eastern region by increasing the proportion of foreign electricity, replacing gas turbines, increasing the installed capacity of new energy and the proportion of new energy power generation. From January to October, the national hydropower generation increased by 6.5% year-on-year, while the thermal power generation increased by only 1.1% year-on-year; the proportion of foreign electricity in Zhejiang, Shanghai and Guangdong reached 29.1, 50.7 and 31.3% respectively.

The realization rate of Changxie coal is improved. With the release of upstream advanced production capacity, Shanxi, Inner Mongolia and other major coal producing enterprises increased production and shipment, the market supply was generally loose, domestic production plus import volume was greater than coal consumption, and the performance rate of medium and long-term contracts was more than 90%. Cement, chemical industry and other industries that can drive up the market coal price are also increasing the purchase quantity of Changxie coal and imported coal, and the quantity of coal transported to the market is relatively small; therefore, even if the demand of cement and other industries picks up, the coal price will not rise.

Upstream production, railway and port shipment are normal, and advanced production capacity is released. This year, the release of advanced production capacity of upstream coal mines was accelerated, the production of raw coal was increased, coal transportation capacity was increased in railways and ports, coastal coal transportation was more relaxed, and coal could be delivered to users in time. In addition, the number of coal shipments from the railway to coastal and riverside areas is also increasing. This year, even in the peak season of coal use (winter and summer), downstream users are not short of coal, and they always keep a high storage status, which has curbed the rise of coal prices.

The imported coal is too high. In the first half of this year, China imported 154 million tons of coal, an increase of only 8.3 million tons on a year-on-year basis, with little increase; it is estimated that in the second half of this year, China imported 164 million tons of coal, 10 million tons more than in the first half of this year; due to the low base in the second half of last year, the second half of this year imported more than 1995 million tons on a year-on-year basis. In addition, in the second half of this year, the inventory of power plants is much higher than that in the first half of this year; therefore, the impact of imported coal in the second half of this year is greater. Especially in the third quarter, the import of coal surged, with an average monthly import of up to 32.03 million tons, which increased the pressure of supply exceeding demand in the domestic market and kept the power plant inventory at a high level.

The high inventory of customers drives down the price of coal and reduces the spot purchase. Customers rely on high inventory to drive down the price of coal, so as to promote the operation of low price of coal throughout the year, especially in the second half of the year. In the second half of the year, the port market coal price fluctuated between 550-570 CNY/ton; even if there was a small rebound, it was only a symbolic resistance rebound, with a small increase. Even from October, the daily consumption of power plants is much better than that of last year, but it is not helpful; under the pressure of high inventory of power plants, the market coal supply and demand are weak, and the coal price continues to run at a low level.