With the gradual implementation of the supply guarantee policy, thermal coal production will increase steadily. After the peak season in August, the tight supply situation is expected to improve significantly, and thermal coal prices will fluctuate from high levels.

In July, when thermal coal is about to enter the seasonal peak season, the supply of goods in the market began to be in short supply, and northern ports continued to destock. Imports were difficult to make up for the demand gap, and the spot price of thermal coal futures both oscillated and rose. The price of 5,500 kcal thermal coal in northern ports has reached an extremely high level of 1,100 yuan/ton, and it is imminent to ensure the supply of thermal coal. To this end, various national ministries and commissions have recently issued documents to ensure coal supply.

The guarantee policy gradually increases

On July 30, the National Development and Reform Commission, the Energy Administration and the Work Safety Supervision Bureau jointly issued a notice to encourage eligible coal mines to increase production capacity, and implement a capacity replacement commitment system for coal mine capacity increase (for coal mines that submitted an application for nuclear increase before March 31, 2022) , There is no need to implement capacity replacement indicators in advance, and capacity replacement can be carried out in a promised way. After obtaining the approval for capacity increase, the capacity replacement plan will be completed within 3 months). This move allows the market to see hope for an increase in coal production in the short term. On August 3, the Inner Mongolia Energy Administration issued a policy to promote the implementation of nuclear increase capacity replacement. On the same day, news came out from Inner Mongolia that 38 open-pit coal mines in Ordos city that had been shut down due to incomplete land use procedures had been approved for land use procedures, involving a production capacity of 66.7 million tons. All of these coal mines have resumed production.

On August 4, the National Development and Reform Commission and the Energy Administration jointly issued a notice requesting 5 provinces including Inner Mongolia, Shanxi, Shaanxi, Ningxia, and Xinjiang to extend the formalities for 15 coal mines that have been suspended due to joint trial operation and agree to joint trial operation. The time will be extended for another year to increase production and supply while ensuring safety. At this stage, the 15 coal mines involved in production capacity of 43.5 million tons/year have all resumed production.

The downstream wait-and-see mood is strong

From a fundamental point of view, the margin of coal supply has eased, and Ordos production has recently returned to a high level. The five-port railway transfer in the north has returned to the level of around 1.5 million tons, and the northern port's inventory is relatively sufficient. On the downstream demand side, power plants have strong expectations of ensuring coal supply, predicting that thermal coal prices will weaken, so the purchasing enthusiasm is very low. Although the thermal coal price of northern ports has not fallen sharply, the actual transaction volume is extremely low. . Correspondingly, the throughput of the five northern ports has recently been at a low level, which has continued to be less than the amount transferred by railways, making the inventory of northern ports stopped falling and turned up. At the same time, traders have increased their willingness to avoid risks, and the port price on August 5 dropped slightly from 1,100 yuan/ton to 1,090 yuan/ton. Although the price has only dropped by RMB 10/ton, it is the first time in recent months that it has been lowered. This also shows that downstream terminals have mostly stayed on the sidelines, and the situation of strong trade links is unsustainable.

In the next few days, the weather in the Ordos area will remain mainly sunny, and the output of open-pit coal mines will be released to a certain extent, and my country's coal supply is expected to remain high. However, from the demand side, the daily consumption of thermal coal has entered the seasonal peak season. Recently, the daily consumption level of power plants in the eight coastal provinces has been at a high level. And because power plants are not actively purchasing thermal coal, power plant inventories are still in a downward channel. The inventory of power plants at this stage is still significantly lower than the level of the same period in previous years.

Prices will return to fundamentals dominance

From the perspective of the import side, affected by the international situation, my country's thermal coal imports are not tepid, and it is difficult to have a significant increase. Although the June thermal coal imports rebounded after decreasing month by month from March to May, the month-on-month increase was only 3 million tons, which has little impact compared with my country's own coal production.

Reflected on the price side, the policy of ensuring supply has been frequently increased, and the spot price of thermal coal in northern ports has not yet seen a sharp drop since the beginning of coal production increase. However, the price of thermal coal has risen sluggishly in recent days, and it is difficult to continue to skyrocket as in the first half of the year due to policy influences. With the gradual implementation of the supply guarantee policy, thermal coal production will increase steadily. After the peak season in August, the tight supply and demand situation of thermal coal is expected to improve significantly. At that time, thermal coal prices will oscillate from a high level and return to a reasonable range.