Crude oil price decline transmitted to coal market

Since March, the global epidemic situation has escalated and the global economic operation has encountered great challenges. The crude oil price has been fluctuating and falling, which has driven the prices of the international bulk commodity market to fall across the board. The operation of the coal market, which belongs to the same fossil raw materials and is an alternative to each other, has also been affected. At present, the international coal price has entered the decline channel. Under the background of loose supply and demand in the domestic coal market, the pressure of price decline is prominent. On March 6, the decline of international crude oil price was transmitted to the coal market. OPEC and non OPEC oil producing countries represented by Russia failed to reach an agreement on continuing to extend crude oil production reduction. After the breakdown of the negotiation, Saudi Arabia took the lead in launching a crude oil price war. Oil producing countries increased production and cut prices in succession to seize the market.

The international crude oil price fell precipitously. By the end of March 26, WTI crude oil had fallen below $30 per barrel to $22.60, a new low since 2002; Brent crude oil was at $26.34, a new low since 2003. At the time of the escalation of the international epidemic, the demand for crude oil has shrunk dramatically, while the oil producing countries have opened the production valve, which will undoubtedly aggravate the imbalance between supply and demand in the crude oil market. As a basic energy product, the sharp drop in international crude oil price not only drives the overall decline in the price of international bulk commodity market, but also profoundly affects the economic operation from the perspective of supply and demand. The coal market closely related to the economic operation is also affected. Since this year, the three major indicators of international coal price - the spot price of power coal in Newcastle port, Australia, the spot price of power coal in ara port, Europe and the spot price of power coal in Richard port, South Africa have declined as a whole. As of February 28, the power coal price index of Australia's Newcastle port was 66.77 CNY/ton, down $1.44/ton on a month on month basis, down 2.11%; the power coal price index of Europe's ara three ports was 45.88 USD / ton, down $3.36/ton on a month on month basis, down 6.82%; the power coal price index of South Africa's Richard port was 76.21 USD / ton, down $5.78/ton on a month on month basis, down 7.05%.

On March 23, the power coal price index of Newcastle port in Australia was 66.55 US dollars / ton, down 0.22 US dollars / ton compared with February 28; the power coal price index of three ports in ara market in Europe was 45.75 US dollars / ton, down 0.13 US dollars / ton compared with February 28; the power coal price index of Richard port in South Africa was 53.63 US dollars / ton, down 22.58 US dollars / ton compared with February 28. "Coal and crude oil are both fossil raw materials, and they are substitutes for each other. After correlation analysis and regression analysis, it is found that there is a positive correlation between coal price and crude oil price. In theory, for every 1% increase in the price of crude oil, the price of coal will rise by 0.3%, and so will the decline. " Zhang Min, senior analyst of Zhuo Chuang information, told our reporter that the recent decline in crude oil prices has been transmitted to the coal market. The price of domestic coal has returned to the domestic coal market. Since March, the price of coal has stopped rising and falling. In February, the novel coronavirus pneumonia epidemic spread, the coal mine generally delayed start up, coal supply and demand appeared short term tight situation, and drove the price of the producer and port coal.

Data shows that in terms of origin, the price of 6000 kcal main power coal mine in Yulin, Shaanxi Province is 475 CNY/ton, with a cumulative increase of 70-100 CNY/ton; the price of 5500 kcal main power coal mine in Ordos, Inner Mongolia is 370 CNY/ton, with a cumulative increase of 50-70 CNY/ton; the price of 5500 kcal power coal car board in the southern suburb of Datong, Shanxi Province, with a tax content of 450 CNY/ton, with a rise of 20-30 CNY/ton. In terms of ports, Qinhuangdao 5500 kcal power coal increased by 7 CNY/ton in total, with 570 CNY/ton of tax included in account closing. However, after March, the price of power coal fell to the top. As of March 23, the price of 6000 kcal main power coal mine in Yulin, Shaanxi Province has been reduced to 415 CNY/ton, with a cumulative decrease of 60 CNY/ton; the price of 5500 kcal main power coal mine in Ordos, Inner Mongolia has been reduced to 320-325 CNY/ton, with a cumulative decrease of about 40 CNY/ton. The price of 5500 kcal power coal in Qinhuangdao port has decreased by about 30 CNY/ton to 545 CNY/ton. "After entering March, the decline of coal prices in the producing areas and ports has far exceeded the increase of coal prices in February." Zhang Min said that three factors led to the overall decline of domestic power coal prices. First, coal and crude oil are substitutes for each other, and the price of international crude oil falls sharply, which impacts the coal market. Secondly, with the acceleration of the resumption of domestic coal mines, the coal production rate has been greatly improved, and the situation of coal supply shortage in the early stage has been effectively alleviated. Third, in late March, downstream industrial enterprises returned to work one after another, but the industrial power consumption has not recovered to the level of previous years, the daily consumption of power plants has limited space to rise, and the downstream procurement pace continues to slow down.

From March 1 to 26, the average daily coal consumption of six coastal power plants was 524700 tons, down 135700 tons compared with the same period last year; the inventory was over 17.5 million tons, and the available days were over 30 days. The lack of demand suppresses the enthusiasm of downstream procurement, and the coal price is under pressure. Coal industry fundamentals are still looking good in the later period, coal market is facing a more complex situation. From an international perspective, the current global epidemic situation is escalating, the global economic operation is facing great challenges, the crude oil price mess is not over, the stock market is volatile, the world economy is facing the risk of financial crisis, and the peripheral crisis of coal market operation is increasing. From the domestic point of view, with the promotion of epidemic prevention and control measures, the epidemic situation in most parts of the country has been effectively controlled, the coal mine resumption rate has returned to the previous level, and the coal supply is relatively sufficient. However, the main economic areas in the lower reaches have not yet fully returned to work. At present, due to the spread of overseas epidemics, the number of imported cases in major cities has gradually increased, and many prevention and control measures have been upgraded, which has greatly reduced the capacity of industrial and commercial enterprises to return to work and achieve production. In addition, with the warm weather, the traditional coal off-season is coming, the civil power load will also fall, and the coal consumption demand is difficult to boost. On the whole, the supply and demand pattern of coal will continue to be relaxed, and the downward pressure on coal prices in the later period will be highlighted.

"The coal industry is a basic energy industry, which is greatly affected by the macro-economy. This epidemic has a great impact on the coal industry in the short term. But in the medium term, with the epidemic gradually under control, the main energy of macro-control will change from controlling the epidemic to stabilizing growth and expectation, and the monetary and fiscal policies will also tend to be positive. With the decline of the epidemic situation, the demand will be gradually released, the hedge of low inventory and stable growth policy in manufacturing industry, and the strength of fiscal and monetary policies are expected to produce a wave of policy positive, which will also be conducive to the improvement of the fundamentals of the coal industry. " Pan Wei, coal industry analyst at China Galaxy Securities Research Institute, said that in the medium and long term, the fundamentals of the coal industry are still good.