An overview of China thermal coal market since Apr Policy,  Viewpoint,  Thermal Coal 2018-06-01 11:55:00

After a two-month-long decline since the Lunar New Year holiday ended late February, China's thermal coal market started picking up in mid-April and maintained the upward strength until late May, when the authorities had to take measures to cool down the overheated market.


This round of growth was mainly driven by expectations for higher demand in the coming peak demand season, said analysts with industry consultant Fenwei Energy Information Services in its latest weekly report dated May 25.


Such expectations were reinforced by lower hydropower output, rapid growth of utility coal burns, and slow release of output and import restrictions.  


China re-imposed restrictions on import coal business at southern and eastern ports in late April. Ports in Xiamen, Quanzhou and Meizhou cities, Fujian province were no longer able to receive import coal. Other ports including Fangcheng in southern Guangxi and Zhoushan in eastern Zhejiang province were ordered to extend customs clearance for import cargoes.


This generally agreed consensus prompted earlier-than-expected restocking by traders and end users, driving up prices in a tightly balanced market, the analysts said.  


According to Fewnwei assessment, CCI spot index for the 5,500 Kcal/kg NAR thermal coal traded at Qinhuangdao port climbed to 665 yuan/t on May 21 from 569 yuan/t FOB on April 18, before edging down to 646 yuan/t on May 25.

More-than-expected demand China's thermal power generation increased 7.1% on the year to 1,595.1 TWh in the first four months. The growth accelerated in April, rising 7.3% year on year to 378.47 TWh, compared to 1.4% in March.


Higher power output means more coal was burned to fire boilers during this period. Data showed daily coal burns of the six major coastal power groups had already surpassed the-year-ago level in April, but in a slight way.


An obvious increase has been observed since May 12 when coal burns reached 664,000 tonnes, compared to only 42,000 tonnes than the same day last year. On May 23, 196,000 tonnes more coal was burned than a year earlier, the highest since February 27.


On the other hand, the six's coal stocks decreased at a faster pace. Their combined stocks fell consistently from a three-year high of 14.904 million tonnes on March 29 to 12.828 million tonnes on May 25, which was 318,000 tonnes lower than a year ago. The days of coverage accordingly reduced to 16 days from 20 days on average.


Lower hydropower Higher coal consumption was also related to a lack of hydroelectricity. Although there was a 1.3% growth of hydropower generation over January-April, the output in March and April totaled 70.18 TWh and 66.5 TWh, respectively, down 5.3% and 2.6% on the year.


Slowly growing output China's raw coal output totaled 1.097 billion tonnes in January-April, a 3.8% increase from a year ago. During the four months, however, effective thermal coal supply totaled 910.04 million tonnes, 44.18 million tonnes less than total consumption.


Due to safety and environmental inspections in major production areas of Shaanxi and Inner Mongolia, China's monthly output was unable to break the 300-million-tonne mark, far below the same period of 2015, when the de-capacity campaign hadn't started.


Daqin maintenance China's largest coal-dedicated Daqin railway started its spring maintenance on April 7 and lasted until May 1, together with the Fengtai-Shacheng-Datong, North Tongpu (Datong-Taiyuan) and Qian'an-Caofeidian rail lines.


The maintenance, 3-4 hours each morning during the period, led to a marked decrease in coal stocks at Qinhuangdao port, which dropped to 4.865 million tonnes on May 1 from 6.645 million tonnes on April 9.


While maintenance itself may not drive price substantially, the combined effect with other factors could not be neglected.


As offer prices for 5,500 Kcal/kg NAR thermal coal soared to 680 yuan/t in late May, China's top economic planner the National Development and Reform Commission (NDRC) on May 18 issued nine measures to prevent it from going wild.


These measures included enhancing production, releasing more high-quality capacity, raising rail capacity, ensuring long-term contracts, leaving more room to renewable electricity, buffer stock adjustment, reducing coal consumption, strengthening supervision and deepening joint operation between coal and power sectors.


In another conference three days later, the NDRC outlined seven follow-up measures, hoping to bring price back to the "rational range" of 500-570 yuan/t FOB with VAT for spot 5,500 Kcal/kg NAR coal.


These measures heavily hit market confidence, with the sentiment turning bearish immediately. Offer prices for 5,500 Kcal/kg NAR thermal coal at northern ports sharply decreased to around 660 yuan/t last week.


Volatile market 

However, domestic spot market has recovered again this week. The 5,500 Kcal/kg NAR thermal coal from Shanxi province rebounded above 660 yuan/t FOB, and is poised to go up further.


It's still hard to tell where the market will exactly go, due to the time lag for policy measures to show effect. The authorities may unveil more measures to boost supply and stabilize market, including easing of import restriction, as insiders pointed out.


Follow us for further updates on the Chinese thermal coal market. More details about the Fenwei Coal Weekly Update, please visit, or contact us directly via

(Writing by Alex Guo  Editing by Harry Huo)
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