• 2016-2017 China Coking Coal Market Analysis and Forecast

  • Cycle of publication: Annual

    Date of completion: Jan 26, 2017

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The year 2016 has witnessed dramatic changes upon China coal industry: the State Council issued opinions to resolve overcapacity, followed by provincial mandate for exercising 276 workdays among all coal mines. Such intensified effort has tightened domestic coal supply, triggered soaring prices after a 4-year consecutive decline and also boosted imports. But recently, the NDRC gave permit to more qualified mines to resume 330 workdays for securing supply in heating season and stabilizing prices.

In such context, market players and observers both home and abroad have expressed deep concerns for China coal industry in 2017. Our annual report series (for coking/thermal coal) will address these concerns by guiding readers to review developments of China coal market in 2016 and look ahead into the coming year. This report will be presented in form of PPT.


Part 1: 2016 China Coking Coal Market Review

1   Demand Side

     1.1  Macro-economic background (GDP, FAI, IVA, PMI and investment into real estate and infrastructure show signs of stabilizing)

     1.2  Growth in iron & steel output outpaced expectation due to recovering demand, but coke output declined as result of destocking

     1.3  Steel exports remained steady, while coke exports hit a new high since 2009

     1.4  Steel stock fell after rise, while coke destocking achieved significant result

     1.5  Steel and coke prices rebounded vigorously from low level (due to recovering demand, implementation of strict decapacity and environment protection policies)

     1.6  National coking coal consumption

     1.7  Changes on coking coal consumption pattern (determined by changes on coke ratio and coking coal blending ratio)

2   Supply Side

     2.1  Coal industry supply-side reform to help coal companies out of difficulties by resolving overcapacity and lowering output based on 276 workdays

     2.2  Implementation effect of decapacity and 276-workdays policies

     2.3  Coking coal capacity, split by mines of operating, under construction, completed, suspended and closed

     2.4  Coking coal output dropped dramatically based on 276 workdays, and production recovery less than expected even after qualified safety mines resumed 330 workdays

     2.5  Frequent mine accidents at year-end has resulted in widespread safety inspection which is sure to interrupt coal production

3   Supply-demand Pattern

     3.1  Coking coal logistics wassometimes interrupted by short of coal wagons resulted from rail capacity adjustment and intensified management of vehicle overloading

     3.2  Coking coal stock kept declining and drop to a 5-year low

     3.3  Coking coal supply turned to short from loose amid production cut, destocking and unsmooth transportation, and such situation exacerbated in 2H16, which now turns to tight supply-demand balance after qualified safety mines resumed 330 workdays

     3.4  Growth in import volume was higher than expected, with Mongolian coal inflow back to its historical high

     3.5  Export volume increased remarkably but remained low as a whole, with Japan and S. Korea as major destinations

4   Price Trend

     4.1  Coking coal prices climbed continuously from low base, with an obviously faster pace in Q3 and hit a 4-year high in mid Q4, but tended to be stable afterwards

     4.2  Private miners saw their coal prices rise or fall ahead of key SOEs

     4.3  Government supports key suppliers and buyers to sign mid-to-long term contract to stabilize supply and price - contract price is based on both benchmark price and floating price

     4.4  China’s increasing coal imports boosted global coking coal prices

5   Increasing Production Cost


Part 2: 2017 China Coking Coal Market Outlook

6   Slightly Decreasing Demand

     6.1  GDP to maintain “L”-shape growth and rise by about 6.5%

     6.2  Slowdown in iron & steel production (iron & steel production to remain under pressure from elimination of backward capacity and strict environment protection policies)

     6.3  Steel and coke exports to remain stable

     6.4  Output of pig iron, crude steel and coke to register slight decrease

     6.5  Forecast of national total coking coal demand

7   Tight Supply-demand Balance Turns to Slightly Loose Supply

     7.1  To shift focus from production cut to elimination of overcapacity, but not affect coal output

     7.2  Continuous implementation of decapacity policy and using “276 workdays” flexibly to control coal supply

     7.3  Frequent safety inspection to interrupt normal coal production

     7.4  Coal mines, transfer ports and end users to turn from destocking to restocking

     7.5  Coking coal capacity, split by mines of operating, under construction, completed, suspended and closed

     7.6  Forecast of national coking coal supply

8   Transport Pattern

     8.1  By rail - coal flow back to priority, transport capacity tends to be ease, while transport cost to stabilize or edge up

     8.2  By road - trucking freight to go up due to strict management of vehicle overloading and expectation for rising oil prices

9   Import and Export Volume

     9.1  Imports to drop slightly from 2016 due to expectation for eased domestic undersupply and higher import price (imports may show a pattern of low in 1H17 and high in 2H17 driven by narrowing or widening price gap between domestic and imported coal)

     9.2  Exports to keep increasing but remain low on the whole

10  Continuous Increase in Production Cost

11  Price Forecast

     11.1  Overall, coking coal prices tend to be lower from 2016 year-end high due to slowing demand and easing supply

     11.2  Coking coal prices tend to be propped up by continuous implementation of 276 workdays and intensified safety inspection

     11.3  Price forecast based on key factors analysis that impact coal prices