“Users need to take samples before buying coal, and take a sample of about 300 kilograms. In the past, sample coal was provided for free, and now even the sample coal has begun to be weighed and charged!” The sales person in charge of a large coal company in Shanxi said frankly that since the beginning of this year, the coal market Very hot, the market coal price hit a new high in the past ten years.

The State Council executive meeting held on May 19 pointed out that it is necessary to attach great importance to the adverse effects of rising commodity prices, ensure the supply of bulk commodities, curb unreasonable price increases, and urge key coal companies to increase production and supply while ensuring safety. This is the second consecutive week of the State Council executive meeting "calling" the price of bulk commodities.

The off-season is not short: the gap between supply and demand drives up coal prices

From March to May each year, this is the low season for traditional coal consumption. However, the off-season of this year's coal market is not low, the coal mines in the main producing areas have low inventories, the phenomenon of coal carts queuing for loading has reappeared, and coal prices have continued to soar. CCTD Bohai Rim thermal coal spot reference price shows that from March 1 to May 10, the spot price of thermal coal with a calorific value of 5,500 kcal rose from 571 yuan/ton to 865 yuan/ton, an increase of more than 51%.

In order to prevent market participants from misjudging the price trend, starting from May 11, the release of multiple coal price indexes including the CCTD Bohai Rim Thermal Coal Spot Reference Price has been suspended.

The industry believes that since March, the contradiction between the shrinkage of coal production and the rapid growth of consumer demand is the basic factor that has caused the market coal price to rise sharply.

From the supply side, on the one hand, the safety and environmental protection policies of the main production areas are tightened, and the increase in coal production is limited. According to data released by the National Bureau of Statistics on May 17, the national raw coal output was 320 million tons in April, a year-on-year decrease of 1.8%.

On the other hand, driven by the global economic recovery and the impact of loose monetary policies such as the over-issuance of the U.S. dollar, funds continued to flow into the procyclical sector, international coal prices and international shipping rates continued to rise, the advantage of imported coal CIF prices weakened, and China-Australia relations were superimposed once again. Due to tension and other factors, imported coal has shrunk significantly. According to data from the General Administration of Customs, in the first four months of this year, the country's coal imports totaled 90.13 million tons, a year-on-year decrease of 36.49 million tons, or 28.8%.

From the demand side, my country’s economy continues to develop for the better, foreign epidemics are repeated, and manufacturing orders are accelerating to return to the country, which has led to a significant increase in electricity demand. In April, despite the decline in raw coal production, my country's power generation increased by 11% year-on-year, of which thermal power increased by 12.5% year-on-year. In addition, major coal-using industries such as steel, coke, and cement maintained rapid growth.

Back to fundamentals: "ebb" of irrational factors

Although there is support for rising coal prices, in the eyes of many industry insiders, this round of "coal crazy" is a bit too violent.

Li Xuegang, vice president of China Coal Market Network, said that the current tension between the supply and demand of thermal coal in the coastal market is significantly lower than at the beginning of this year. Compared with the peak consumption season in early January, the daily coal consumption of the sample power plants in the 8 coastal provinces of CCTD decreased by about 30% in early May, and the available days of thermal coal inventory increased by more than 4 days. The off-season characteristics of thermal coal consumption are still obvious.

"Financial markets and irrational emotions are the driving force behind the price overshoot." Li Sheng, deputy general manager of the Inner Mongolia Coal Trading Center, believes that the price of thermal coal futures has risen sharply, which has expanded the volatility of coal spot prices. Under the tight coal supply situation, coal producers and traders have relatively consistent predictions on the market. Traders’ speculative mentality and production enterprises’ profit-seeking mentality have jointly chased up the increase, further pushing up market prices.

Analysts believe that the rise in coal prices in May exceeded market expectations and has risen to a high level of psychological defense in the upstream and downstream areas. This has created strong risk pressure on the market, and the wait-and-see and "fear of heights" are gradually rising.

The abnormal jump in coal prices has aroused great concern at the national level, and on May 12 and May 19, the State Council’s executive meeting twice "named" the price of bulk commodities. The National Development and Reform Commission stated at a press conference held on May 18 that commodity prices will gradually return to the fundamentals of supply and demand.

The capital market has fallen in response, and black products have recently lightened up significantly. On May 19, the main contracts of coking coal and thermal coal fell sharply, with a decrease of nearly 8%. The withdrawal of futures funds has played a certain role in stabilizing expectations for the trend of spot coal prices.

Increasing production and supply: the effect of price stabilization will gradually appear

In fact, the market coal whose prices have soared does not account for a high proportion of the coal market. Since 2016, the coal medium and long-term contract system has played the role of "stabilizer" and "ballast stone" in market operations. In the case of a sharp increase in coal prices, the medium and long-term contract prices will be significantly lower than the market coal prices, and the opposite will happen when coal prices fall sharply.

"Currently, the medium and long-term contract price of coking coal is more than 300 yuan per ton lower than the market coal price." Qiao Dali, deputy director of the contract department of Shanxi Coking Coal Group Coal Sales Company, said that although the market is very hot, the group's medium and long-term contracts are fulfilled in accordance with the requirements of guaranteeing supply. The rate basically reaches 95%.

According to the requirements of the National Development and Reform Commission, the number of medium and long-term contracts signed by coal enterprises above designated size this year should reach more than 80% of their own resources, and the number of medium and long-term contracts signed by power enterprises above designated size should reach 75% of the annual coal consumption, and The monthly compliance rate should not be less than 80%, and the quarterly and annual compliance rate should not be less than 90%.

Since the "13th Five-Year Plan", my country's coal production capacity has gradually concentrated to the main producing areas, and the annual coal output of Shanxi, Shaanxi and Mongolia accounted for more than 70% of the national output. With the increase in industrial concentration, coal production efficiency and total supply capacity have also been enhanced.

Industry insiders believe that after June, major power plants will soon start the peak summer mode, and demand for thermal coal will increase. In the short term, coal supply and demand will still maintain a tight balance. With the release of coal production from the main producing areas and the increase in hydropower output, the effect of price stabilization will gradually appear.