The impact of social public events on coal upstream production enterprises has been basically eliminated, but the downstream demand is still far behind the same period of previous years. However, the positive factors of coal ash market gradually appear, and there is a long-term cooperative mechanism to support the bottom, so it is not suitable to be over bearish.
Recently, the long and short factors interweave, and the decline of power coal price has slowed down. However, the recovery of demand is not as expected, and the international market continues to fall, and the price of power coal still faces greater downward pressure.
Basically eliminate the impact of social public events
At present, the low operating rate of the coal industry has improved, especially the large-scale coal enterprises resume full load production. According to the data of China coal market network, the capacity utilization rate of the sample coal mines in Shanxi, Shaanxi and Inner Mongolia (with a total capacity of 1.55 billion tons, accounting for 70% of the total capacity of the three regions) tested is 82.7%, which is close to the level of the same period in previous years. The supply of the production area continued to increase, the quotation of mine mouth fell, the price of coal in some areas had fallen to the level at the end of 2019, the price of refined oil had fallen due to the superposition of road toll reduction and crude oil slump, and the cost of railway transportation and port miscellaneous expenses had been reduced, the space for traders to operate had increased, the situation of transportation outside the production area was good, and the supply of underground coal was further guaranteed to be sufficient.
However, since February, coal mine safety accidents have occurred frequently in Shandong, Yunnan and Henan. Recently, the video conference on Further Strengthening the current work safety of resumption of work and resumption of production held by the office of the safety committee of the State Council and the emergency management department stressed that we should pay close attention to high-risk risks such as high gas, rockburst, large shift coal mine and “head pond” tailings pond, strengthen safety precautions, strictly abide by the safety bottom line, and effectively curb the occurrence of major accidents. With the follow-up of safety supervision and inspection, the awareness of coal safety production is more strong. In addition, the continuous decline of coal price will form a certain inhibition on coal production, so the mine side may take the initiative to reduce production.
Import restrictions escalated
According to customs data, the coal import volume from January to February 2020 is 68.06 million tons, up 33% year on year. The import volume increased rapidly, overdrawn the import quota. Recently, the import policy has been gradually tightened. Compared with last year, the import quota of large power generation groups has been reduced by 20-30%, and that of some local power plants has been reduced by nearly half. Recently, Xinsha customs orally informed that ships arriving at the port after March 16 are prohibited from discharging Xinsha, because the declared amount of imported coal in Xinsha as of March 16 has reached the quota of 6.5 million tons set by the customs years ago. Whether the follow-up regulatory policy is adjusted will wait for the notice of the customs.
However, at present, the southern power plant is limited by inventory, the purchase of imported coal is not active, and the purchase in the North has not increased significantly. In the short term, import restrictions have limited impact on the market. However, with the gradual resumption of production of steel and cement enterprises in the south, the industrial enterprises that used to mainly import coal as raw materials will be impacted, or have to increase the purchase of coal in the production area. Whether the potential favorable factors at the import end can play a role of boosting, we need to pay attention to the production dynamics of industrial enterprises after public events.
Demand recovery is less than expected
Despite the annual investment plans announced by many provinces, the new infrastructure investment is expected to accelerate, and the central bank’s targeted reduction of standards is intended to improve the impact of public events on the domestic economy and restore normal production order of enterprises. However, from the data feedback from the power plant, the demand side recovery is not optimistic. As of March 17, the daily coal consumption of six coastal power plants was 518200 tons, which was over 500000 tons, which was over 20% lower than that of the previous year. In the first ten days of March, the daily coal consumption of national key power plants was also over 14% lower. The demand side’s performance is not as expected, which puts great pressure on the market. Moreover, when there is no obvious consumption in the downstream high inventory, it is difficult for the demand side to bring a positive boost. In the later stage, with the end of heating power demand, coal consumption focuses on industrial power demand.
Generally speaking, the impact of social public events on coal upstream production enterprises has been basically eliminated, but the downstream demand is still far behind the level of the same period of previous years, with loose supply and weak power coal price oscillation. The main contract is exploring the support of 535 yuan / ton lower than before. However, the positive factors gradually appear, and there is a long-term cooperative mechanism to support the bottom, should not be over bearish. In the medium term, we will wait for further fermentation of favorable factors, especially focusing on the recovery of industrial demand.