At present, residential electricity consumption is in the transition period of peak and off-season, the pressure on demand for electricity and coal has alleviated, and port quotations are weak. However, the supply in the production areas is unstable, the main coal transportation channels have continued to have accidents, and the intermediate links inventory has dropped rapidly. In this case, the price of thermal coal is strongly supported.

The supply in the production area is tight

In July, the output of raw coal in Shaanxi and Inner Mongolia decreased year-on-year and month-on-month, with Inner Mongolia experiencing the most significant decline. In August, the instability of coal production continued to increase. In early August, affected by illegal mining incidents, the Shaanxi and Mongolia region increased inspections, some large coal mines ceased production, heavy precipitation in superimposed production areas, and Inner Mongolia's strict control of coal ticketing, the production and sales of coal mines in Shaanxi and Mongolia continued to be blocked, and pit mouth quotations continued to rise. 

Recently, some coal mines have stopped production and resumed production, which has eased regional supply tensions to a certain extent. However, it is difficult for the production area supply to improve significantly. At present, many coal mines in Shaanxi have ceased production. Coal production in Inner Mongolia is produced according to the approved capacity, and the inventory is low. Recently, there are rumors that coal mines are produced according to the approved capacity of 276 working days. Statutory holidays, Saturdays and Sundays are strictly prohibited, and production is not allowed. Coal is stored in the open air, and the output of the day must be sold out. The market has increased concerns about the supply of producing areas.

In addition, the customs has strict control over the quota of imported coal and customs declaration for foreign imports. Recently, the time for the issuance of the import coal license has also been extended. The time from application to issuance has been extended from the original 1-2 days to 11 days.

Inventory of intermediate links is low

At present, the coal inventory of important ports in Bohai Rim is basically at the lowest level in the same period in the past three years. As of August 27, the coal inventory at Qinhuangdao Port had fallen to 4.61 million tons, which was 1.36 million tons lower than the same period last year, or more than 20%. The reasons are as follows: First, the port quotation has increased upside down, and the difficulty of storing coal in heavy rainfall has increased, and traders’ willingness to purchase and stocking has decreased; second, there have been two accidents on the Daqin line, the amount of coal transferred from the port has dropped sharply, and the subsequent railway operation speed It may be affected. At the same time, the centralized inspection and repair of the Daqin line in autumn may also be advanced, which is not conducive to the recovery of port inventory. In addition, it is about to enter the September contract delivery month, and once the delivery volume is large, some port cargo will be locked, which will further shrink the port inventory supply, and the delivery quality may also lead to a structural tightness in port supply.

Demand is expected to increase in the off-season

August is the traditional peak season for thermal coal demand, but due to the high inventory of downstream companies, their willingness to purchase is not strong. Although September is in the low season of demand, it should not be overly pessimistic. On the one hand, the Northeast Winter Reserve procurement is imminent. If Inner Mongolia, the main coal exporter, cannot meet the market demand, it is not ruled out that companies turn to Bohai Rim ports for procurement; on the other hand, the coal inventory of key power plants in the country has begun to decline, and it is difficult to relax imports Downstream companies may purchase in advance in the off-season. In addition, the domestic economic situation continues to improve and the growth rate of infrastructure construction is accelerating, which will increase the demand for direct coal use.

In short, the price of the main contract of thermal coal futures in the previous period was adjusted back, but it did not fall below the upward trend line. Therefore, the support above 550-555 RMB/ton is strong.