Benchmark price of power coal tested for the first time in recent years

In April, coal consumption was in the traditional off-season, the international epidemic spread, the actual industrial construction recovery was slow, and the power plant will start to take the initiative to inventory, the coal supply will be further relaxed, and the spot price is expected to fall below the benchmark price of Changxie. Under the background of rapid recovery of supply and lagging recovery of demand, the supply of coal market in March further tends to be loose, and the port price successively falls below the long-term and annual prices. On March 31, the 5500 kcal coal closing price index of Yimei north port closed at 538 yuan per ton, down 32 yuan or 5.6% from the end of February. After the rapid accumulation of the market price of each link fell into March, the upstream coal mine construction situation further improved, and the pithead market returned to weakness. In novel coronavirus pneumonia, the increase in the volume of imports was significantly increased in the coastal market. However, the recovery of the demand was still not satisfactory under the dual influence of the new crown pneumonia epidemic and the low consumption season of coal consumption. The enthusiasm of downstream procurement is not high, all links are accumulated rapidly, the market price continues to fall, falling below the monthly long-term and annual long-term prices. Since March, the recovery rate of Shanxi, Shaanxi and Inner Mongolia, the main producing areas, has been about 90%.

As of March 24, the recovery rate of coal production capacity in Shanxi Province has reached 95.42%, and the number of coal mines produced, the utilization rate of coal production capacity and the daily output have all recovered to the normal level. As of March 22, there were 238 coal mines in Inner Mongolia, with an annual capacity recovery rate of 88%. As of March 22, the capacity recovery rate of key coal mining enterprises in Shaanxi Province has reached 88.7%. At the same time of the recovery of mine mouth supply, the downstream procurement is limited, the sales of coal mines are not smooth, some coal mines have top warehouses, the mine mouth price continues to decline, and all the increase after the retrenchment. At the same time of the recovery of mine mouth production, the transfer in situation of the northern port continued to improve. The average daily transfer in volume in late March was about 1.5 million tons, an increase of 280000 tons over the end of February. With the effective control of the domestic epidemic situation, the speed of returning to work in March was gradually accelerated. Data from the Ministry of industry and information technology shows that as of March 28, the average operating rate of Industrial Enterprises above Designated Size in China has reached 98.6%, the average return rate of personnel has reached 89.9%, and the return rate of small and medium-sized enterprises has reached 76%. However, it is worth noting that the gap between return to work rate and load rate is relatively obvious. Under the influence of export pressure, infrastructure construction and slow start-up of real estate, the operation load of industrial enterprises grows slowly. As of March 27, the operation rate of electric furnaces in China was 49.36%, down 21.15% year-on-year; the national cement price index is still in a downward trend, and the market data shows that the operation rate of domestic mixing plant is only 40% of that of the same period in previous years, and the average load rate of cement plant is expected to be about 50%.

In addition, the operating rate of export dependent enterprises, such as textile and chemical enterprises, is even lower. With the rapid spread of the international epidemic, the capital market is pessimistic about the economic expectation for the second quarter, and a number of institutions have lowered the expectation of global economic growth. In March, the U.S. stock market triggered four circuit breakers, affecting both domestic stock market and futures market. China's export accounts for more than 17% of the GDP, while the European and American countries are the main export countries of China. The spread of the international epidemic has led to a greater dilemma for the domestic export industry, dragging down the economic recovery. The accelerated pick-up of port inventory has led to a growing willingness of traders to ship. The accumulation of power plant inventory in low daily consumption leads to almost stagnation of market coal procurement, and the long-term cooperative procurement of some power plants has been weak. On March 31, the total inventory of Beifang port was 22.893 million tons, an increase of 8.09 million tons over the end of February, an increase of 54.7%. On March 27, the port inventory of the Yangtze River Estuary totaled 6.14 million tons, up 2.063 million tons from the low point in February, an increase of 50.6%. On March 31, the total inventory of coastal power plants of the five power groups was 14855500 tons, an increase of 8.8% year on year. After the off-season power plant enters into the active destocking cycle in April, the traditional coal consumption will be replaced by hydropower and other energy sources in the off-season, and the coal supply will be further relaxed. It is expected that the spot price of coal will still experience a round of decline. From the perspective of export, the overseas epidemic has developed rapidly since the middle and late March, so the impact of the reduction of export orders in February and march on domestic export enterprises will be more prominent in April.

From the domestic point of view, the arrival of the flood season in April will have a negative impact on the domestic construction, and the decline in the construction rate will further slow down the recovery of production in the cement and building materials industries, resulting in the slow recovery of electricity consumption and coal procurement of non electric enterprises. Since the second half of 2018, the power plant has adopted the strategy of high inventory. As the coal supply tends to be loose and the coal price continues to decline, the market coal price is lower than the monthly long-term co price operation, therefore, under the current price range, the need for power plants to maintain high inventory is reduced. Affected by the epidemic this year, the domestic power consumption is running at a low level. The average daily consumption of coastal power plants is down about 16% year-on-year, while the inventory is up 10% year-on-year. In the case of slow inventory consumption, maintaining high inventory increases the cost of capital occupation and the risk of inventory card loss. At the same time, in the off-season operation in April, the power plant also has the demand to actively go to storage. From the recent data, Datang Group power plant and Huaneng Group power plant started the de stocking cycle, in which Datang Group power plant inventory decreased 185300 tons compared with the peak after the Spring Festival, a decrease of 12%; Huaneng Group power plant inventory decreased 1296000 tons, a decrease of 22%. Before and after the Qingming Festival, there will be more rain in China, and hydropower will start to work gradually.

According to historical data, in the past three years, the proportion of hydropower generation is about 15%, and April is in the initial hydropower generation period. On March 28 this year, China entered the flood season four days in advance. Entering the flood season means entering the period of heavy rainfall concentration. The rainfall will be stronger and last longer, and the risk of sudden flood disaster will increase. At the same time, the Ministry of water resources predicted that the overall deviation of China's meteorological and hydrological year in 2020, more extreme events, and more floods than droughts. According to the daily power generation model of the Three Gorges, on the basis of a high base in 2019, the power generation of the Three Gorges increased by 3% year on year in March. The author believes that in April, the impact of the international epidemic on domestic exports will be more obvious, while the domestic industrial load recovery efficiency is relatively low, and the growth rate of electricity consumption is relatively limited. The increase of substitution effect of clean energy will impact the increment of marginal thermal power. In terms of the normal supply at the mine mouth and the high inventory at the downstream, the start of the active destocking of the power plant will lead to further easing of supply. It is expected that the spot price will fall below the long-term cooperative base price in April, reaching the threshold of 520 yuan per ton.