Coal price center moves down into consensus

On January 3, the "2020 coal and power industry outlook report meeting" supported by Zheng Shang, sponsored by Jiangsu Guoxin group and organized by Jintai futures was held in Nanjing. More than 180 representatives and individual investors from coal related enterprises and investment research institutions attended the meeting. With regard to the prospect of power supply and demand in 2020, ye Chun, deputy director of the Ministry of industry development and environmental resources of CEC, introduced that the slowdown of domestic and international economic development has increased demand and foreign trade pressure, and the recent warming of the temperature in most parts of the country has also brought negative impact on power consumption. However, China's economy is still full of resilience. Many measures taken by the state to release the potential of domestic demand, the rapid development of power substitution, the decrease of electricity price and the low consumption base in 2019 all make the market not pessimistic about the power data in 2020.

It is preliminarily predicted that the power consumption of the whole society can reach the level of 4% - 5% increase in the same ratio. "In the past decade, China has made great achievements in energy efficiency and environmental protection in the field of thermal power, and renewable energy has developed rapidly. However, it is difficult to fundamentally change the main position of thermal power generation in the short term." Ye Chun said. According to the reporter of futures daily, in 2019, the coal industry entered the final stage of capacity removal. Under the guidance of the structural capacity removal policy, the coal capacity removal of each province mainly focuses on eliminating backward capacity. According to the data, as of November 2019, the country's production capacity was about 93.44 million tons. The speed of capacity replacement is accelerated, and the total approved high-quality capacity in the first three quarters of 2019 is more than twice that of 2018. Among the newly approved coal mines in 2018-2019, the production capacity in the "three West" area is 135.4 million tons, but some of them are not approved to be built in advance and are actually in production.

For the capacity release in 2020, Han Lei, general manager of China coal network research department, believes that in 2020, a large number of Mines under construction will continue to be put into operation, and the effective capacity of the coal industry will continue to improve. In 2020, the released capacity will reach 4.2 billion tons, an increase of 100 million tons compared with 2019, and an increase of 300 million tons compared with 2016. In 2020, the domestic output is expected to be about 3.9 billion tons, which has recovered significantly compared with the initial stage of supply side reform. For the coal transportation and aftermarket price in 2020, Han Lei introduced that the railway transport capacity at the transport end continued to improve, and the overall transport capacity was loose. The normalization of policy control at the import end will affect the decline of the advantage of imported coal. It is expected that the overall domestic supply and demand situation will be relatively loose in 2020, the price gap between domestic and foreign countries will be gradually reduced, the import power will be weakened, and the import scale may be reduced to about 300 million tons.

On the demand side, under the comprehensive expectation that the growth rate of coal consumption in iron and steel, building materials industry and some high energy consuming industries has slowed down significantly, the power industry has maintained the current situation, and the chemical industry has limited growth, it is estimated that the total coal demand in 2020 will be 4.1-4.2 billion tons, and the growth rate will slow down significantly compared with that in 2019. "The overall supply and demand of coal market in China is in a weak balance, and the spot price of power coal in coastal areas will fall back to the green range, fluctuating between 535-590 CNY/ton. In 2020, there will be subtle changes in the pricing system and marketing system of the coal market. Affected by this, the ability of futures pricing will be enhanced, which will also bring new changes to the spot market pricing. " Han Lei said. The domestic coal market is in a weak equilibrium state. What about the global coal market in 2020? Feng Yuan, chief strategist of China dry bulk of mercuria, believes that the Asian maritime coal market, including China, will face a long-term over supply squeeze from other regions and a long-term low price in 2020-2030. On the one hand, European demand is weak and Asian demand is slowing down; on the other hand, international supply is still flexible, which will probably lead to further decline of global coal price center until reaching the warning line of partial excess capacity clearing.

With regard to the future market of imported coal, Feng Yuan believes that the advantages of imported coal will be further reduced in 2020. Under the disturbance of policies, there is uncertainty in simply relying on imported coal to achieve the cost reduction of power enterprises, and the introduction of futures hedging concept is expected to combine the current thinking to deal with price changes, which is more in line with the purpose of long-term cost management and stable operation of enterprises. It is reported that the market-oriented reform of electric power has attracted the attention of the industry. Ye Chun introduced at the meeting that the benchmark feed in tariff of coal power is the core of China's tariff system. After the cancellation of the benchmark tariff of coal power, the benchmark tariff of other energy types will be replaced or terminated in succession, and the industry pattern will be reshaped. Participants believe that with the deepening of power reform, the coal market pricing system and market sales system will also have subtle changes. Affected by this, the ability of futures pricing will be enhanced, which will also bring new changes to the coal spot market pricing.