After the Spring Festival, coal mines resumed production faster than downstream demand, coupled with high inventory suppression in ports and power plants, exacerbating market oversupply, and causing coal prices to fall under pressure. In many places, the weekly decline exceeded 50 yuan/ton, and the monthly price dropped significantly. Entering March, the end of heating in the north has weakened civilian demand, but the non electricity industry has entered the peak season of “gold, three, silver, and four”. The resumption of construction in steel, chemical, and other industries has driven the purchase of raw coal, coupled with policy expectations to boost industrial electricity and accelerate the landing of infrastructure projects. The marginal improvement on the demand side may alleviate market pressure. Although high inventory remains the main constraint, the decline in coal prices is expected to narrow, and attention needs to be paid to the pace of industrial resumption and the progress of destocking in the future.
1、 In terms of price
After the Spring Festival, coal mines in production areas have resumed work and production one after another, and coal supply has steadily rebounded. However, the sluggish downstream purchasing sentiment has constrained market recovery.
Specifically, let’s take a look:
Post holiday resumption stage: Coal mines that were shut down during the holiday gradually resumed production, and the supply from production areas increased significantly compared to before the holiday. However, traders and coal factories have a strong bearish attitude towards the future market, with only a few first-time customers purchasing sporadically. There are few transport vehicles in the mining area, and some coal mines have slightly reduced prices (10-30 yuan/ton) to alleviate inventory pressure.
After the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival), the contradiction between supply and demand was highlighted: state-owned and large coal mines resumed production in an all-round way, and supply has returned to normal. However, affected by the lower purchase price of Shenhua and the slow progress of downstream resumption, the terminal enterprises were not willing to purchase, and only maintained the supply of just needed coal. The coal sales in the mining area market were cold, the inventory pressure was further intensified, and the downward trend of coal prices continued.
At the end of the month, supply fluctuations and price declines widened: Affected by the continuous decline in Beigang coal prices and the further reduction of Shenhua’s external purchase price by 23-30 yuan/ton and other negative factors, market bearish expectations have strengthened, and traders and platform purchases have become more cautious. In addition, some coal mines have temporarily stopped production due to safety inspections (with slight supply fluctuations), and production areas continue to have light transportation. Some coal mines have accumulated inventory, and the weekly decline in pithead coal prices has expanded to 10-30 yuan/ton.
In terms of ports:
In the first ten days, there was a stalemate and a bearish trend: the market recovery after the holiday was slow, the demand for industrial electricity rebounded weakly, the daily consumption growth of power plants was limited, the inventory of coal for electricity remained high (with more than 20 available days), and the power to replenish inventory was insufficient. Terminal procurement has generally been delayed, port quotations have fallen, and the price of Q5500 thermal coal in Qinhuangdao has gradually loosened from 765 yuan/ton at the beginning of the month.
Accelerated bottoming out in the middle and late stages: Downstream procurement demand continues to be sluggish, port inquiries are quiet, and traders are competing to lower prices and sell goods to alleviate inventory pressure, even resulting in sales below the index price. At the same time, the effectiveness of port dredging is insufficient, and the number of anchor ships has remained low for a long time (with some ports having an empty berth rate of over 50%). The rising cost of storage further exacerbates the selling sentiment, and buyers take the opportunity to pressure prices, causing the market to enter a “quantity price simultaneous decline” deadlock.
Weak ending at the end of the month: As of February 28th, the price of Q5500 thermal coal in Qingang has fallen to 700 yuan/ton, with a cumulative drop of 65 yuan/ton for the whole month, the largest single month decline of the year, reflecting a serious lack of market confidence under the loose supply and demand pattern.
2、 Supply side
According to data from the National Bureau of Statistics on the supply side, China’s raw coal production in 2024 was 438.848 million tons, a year-on-year increase of 4.2%; The cumulative production from January to December was 4758.962 million tons, a year-on-year increase of 1.3%. From provincial data, the cumulative year-on-year growth of raw coal production in Inner Mongolia, Shaanxi, and Xinjiang from January to December was 5.4%, 2.0%, and 17.5%, respectively; The cumulative year-on-year decrease in Shanxi’s raw coal production is 6.9%.
3、 In terms of demand
According to the latest data from the National Bureau of Statistics, in 2024, the total electricity consumption of the society will be 9852.1 billion kilowatt hours, a year-on-year increase of 6.8%, of which the power generation of industrial enterprises above designated size will be 9418.1 billion kilowatt hours. From the perspective of electricity consumption by industry, the electricity consumption of the primary industry reached 135.7 billion kilowatt hours, a year-on-year increase of 6.3%; The electricity consumption of the secondary industry reached 6387.4 billion kilowatt hours, a year-on-year increase of 5.1%; The electricity consumption of the tertiary industry reached 1834.8 billion kilowatt hours, a year-on-year increase of 9.9%; The daily electricity consumption of urban and rural residents reached 1494.2 billion kilowatt hours, a year-on-year increase of 10.6%.
In summary, the domestic main production areas’ thermal coal market maintained a weak operation in February, and the overall performance of the demand side was sluggish. Affected by multiple rounds of price reductions in coal mines and large enterprise procurement prices, sales in most coal mines remain weak, and inventory pressure is gradually increasing. Downstream metallurgical, chemical and other industries only maintain price suppression for essential procurement, while terminal power plant inventories operate at high levels, with weak willingness to replenish inventory, further weakening market support. Against the backdrop of an increasingly relaxed supply and demand pattern at the pithead and ports, coal prices are under pressure to decline, presenting a weak situation of “production areas lowering prices and destocking, ports selling and trampling”, and market pessimism spreading.
Entering March, with the continuous efforts of macroeconomic policies, the demand for coal reserves in non electricity industries (such as cement and chemical) is expected to rebound seasonally. Coupled with the fact that coal prices have fallen below some coal mine cost lines, the magnitude of price inversion has expanded or stimulated some users to buy at the bottom and hoard goods. The downward pressure on the market may gradually ease. If the progress of industrial resumption accelerates and the driving effect of infrastructure investment becomes apparent, the increase in non electricity coal consumption will offset the demand gap caused by the decline in heating, and the downward trend of coal prices is expected to narrow. In the medium to long term, if the economic recovery drives the sustained recovery of electricity and non electricity demand, coupled with the emergence of cost support effects, coal prices may gradually stop falling and stabilize.