The Price Of Steam Coal Has Reached A Record High, And The State Plans To Put In 10 Million Tons Of Reserves

Since March this year, steam coal has continued to rise at the high level in the same period of history. Although it suffered a heavy setback in mid May, under the strong support of fundamentals, the price of steam coal went up slowly again.

In late June, there was market expectation that the steam coal market would enter the downward channel in July. Despite the continuous measures to ensure supply and price stability, the price of steam coal continues to hover at a high level due to tight supply and strong demand from coal-fired power plants. July has entered the last ten days, except for the normal consolidation fluctuation, there is no obvious cooling sign of steam coal.

By the end of July 20, the main contract of steam coal closed at 918.4 yuan / ton, up 1.30%, close to the record high of 944.2 yuan / ton set on May 12 this year, and the price level again climbed to the highest level in the previous year.

Strong support from power demand

In mid May, bulk commodities including iron ore, steel and coal rose to the highest level over the years, and non-ferrous metals such as copper, aluminum and zinc also rose. Subsequently, many departments including the national Standing Committee and the national development and Reform Commission exerted strong pressure, resulting in a sharp drop in commodity prices. Although it has experienced a rebound since then, with the arrival of the off-season steel demand, the iron ore and steel market has shown a cooling momentum.

On the contrary, the supply and demand fundamentals of the market have been strong, providing strong support for its price. At present, it has entered the traditional peak season of summer demand. This year, the temperature in many places continues to rise, and the first wave of power consumption peak has arrived.

According to the data released by the State Grid on July 17, China's daily power consumption on July 14 has set a new record, reaching 27.187 billion kwh, an increase of more than 10% compared with the highest value last summer, and an increase of more than 4.7% compared with the extreme cold wave weather at the beginning of the year.

In this round of peak power consumption, the load of central China and East China regional power grids, as well as 11 provincial power grids including Guangdong, Jiangsu, Zhejiang, Anhui, Fujian and Shaanxi, have reached a record high.

Zhu Weijiang, deputy director of the state power dispatching and control center, said that the influence of weather factors and the trend of rapid economic development have led to an obvious increase in power consumption since mid July.

The burden of ensuring the power supply falls on the coal-fired power plants, which also leads to the short-term difficulty in alleviating the demand for steam coal brought by the power demand. According to the annual development report 2021 of China's electric power industry released by China Electric Power Enterprises Federation in July this year, the national full-scale power generation capacity in 2020 will be 7.62 trillion kwh, of which thermal power accounts for 67.9%, which is the absolute main supply force, and hydropower, ranked second, accounts for 17.8% (including pumped storage).

Previously, due to frequent rainstorms in North China, part of the transportation lines were interrupted. In order to ensure the power coal supply in the province, all coal mines in Henan Province are not allowed to sell to other provinces, and all coal produced in the province that can be converted to power coal shall not be washed. On July 18, the national development and Reform Commission issued a notice to a number of large domestic power generation groups, requiring that the coal storage level of power plants be increased within a time limit, so as to ensure that coal shortage and shutdown are not allowed during the peak period of power consumption.

Coal price keeps high fluctuation

In the first half of this year, the price of domestic steam coal fluctuated sharply, and the average price was far higher than that of the same period over the years.

At the beginning of 2021, due to the strict epidemic prevention and control in many places and the safety production and other factors, the increment of coal supply guarantee is limited, the downstream demand continues to be strong, and the coal price in the production area rises to the highest level in the past years. From late January to early March, affected by the Spring Festival holiday and warmer weather in many places, the downstream demand for steam coal was weak, and the coal price experienced a continuous decline.

From the middle of March to the middle of May, with the continuous release of terminal demand and the impact of mismatch between supply and demand, as well as the overall price rise of bulk commodity driven by abundant global liquidity, the domestic coal supply tension has become prominent, and the price of steam coal has also risen. Until the middle of May, many departments such as the National People's Congress of the people's Republic of China and other departments took measures to effectively cope with the rapid rise of commodity prices and its associated effects. The price of steam coal fell sharply along with the prices of other bulk commodities.

However, since then, the tense situation of domestic steam coal market supply and demand has not been fundamentally eased. Many coal mine accidents lead to safety inspection, and then bring about the policy of reducing production and limiting production; However, the high temperature weather continues to increase the demand for electricity in the downstream, and the coal price continues to run at a high level.

My steel network analysis shows that in the first half of the year, the overall domestic power coal storage was operating at a low level, while the inventory in East China and ports was at a low level in the past three years; Previously, the downstream market still had expectations for the production increase policy, so the willingness to accept the high price coal was not strong. At present, the port mainly used fixed transportation and long-term cooperative households, and the market transaction atmosphere was relatively rigid.

Continuous game between policy and market

Recently, in order to stabilize the coal market, the relevant departments have also made frequent efforts at the policy end.

From the perspective of market fundamentals, the demand for electricity maintains a high growth rate, the supply of hydropower is not as good as in previous years, in addition to frequent safety accidents and frequent safety inspections, it is difficult to alleviate the tight supply situation in the short term.

On June 26, the national development and Reform Commission (NDRC) said that it had been working with relevant parties to promote the increase of coal production and supply, the release of high-quality production capacity, the deployment of coal reserves and the supervision of medium and long-term contract performance. At that time, the NDRC predicted that by July, with the growth of hydropower and solar power generation in summer, as well as the increase of coal production and import, the contradiction between coal supply and demand would also tend to ease. Therefore, the production increase plan and production increase situation of main coal producing areas in July have been paid close attention to.

On July 15, the national development and Reform Commission (NDRC) said that in order to ensure the supply of coal during the summer peak, the national development and Reform Commission was prepared to release more than 10 million tons of coal reserves, mainly distributed in dozens of reserve bases and related ports across the country, and could be put into the market at any time according to the needs.

According to the national development and Reform Commission, more than 100 million tons of government adjustable coal reserves have been built in the country, with about 40 million tons of coal in the reserve base. Since this year, the state has put more than 5 million tons of national coal reserves into the market four times.

On July 19, the national development and Reform Commission (NDRC) once again said that China's new high-quality coal production capacity was more than 140 million tons / year in the first half of the year, and nearly 120 million tons / year in the second half of the year. It is expected that the coal import volume will maintain a growth trend in July and August, and is expected to exceed 30 million tons in July, which can better supplement the domestic coal supply.

According to the survey of Mysteel steam coal team, since July, most coal mines in Yulin, Shaanxi Province have resumed production, but the recovery rate of production area supply is lower than expected, and the supply and demand of steam coal are tight; Coal mine environmental protection inspection is still strict. In addition, the coal mine in the region is basically full load production, which continues to suppress coal production, and the production release space is small.

Industry insiders pointed out that the current increase in the supply of production areas has not been significantly increased, and the major power generation groups are required to raise the coal storage level within a time limit, which also leads to the continued bullish sentiment in the market.

Huaxi Securities pointed out that the current peak season of steam coal market has been opened, and the daily consumption of power plants has increased rapidly, with an increase of more than 20% compared with the same period last year. Due to the tight market supply and high prices before, the power plant has started the rapid de stocking and the port inventory has declined rapidly before the replenishment of the warehouse is completed. It is expected that the power plant will still have a greater pressure to make up the reservoir in the future. If the domestic output does not increase significantly, the domestic coal price will remain strong.