• 1H17 China Thermal Coal Market Analysis and 2017 Forecast


  • Cycle of publication: Semi-annual

    Date of completion: Sep , 2017

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SUMMARY

During 2017H1, the Chinese economy showed better-than-expected development (GDP growth rate reached 6.9% YoY), and the domestic coal industry (coal mining and washing) secured a total profit of 147.47 billion yuan, far exceeding the 7.13 billion yuan a year ago, making the coal industry supply-side reform and decapacity policy have achieved positive results.

However, as entering the second half of 2017, the growth of FAI tends to slow down, domestic consumption upgrading is hard to further expand, and exports will remain constrained by global trade barrier. Such negative factors may weigh on growth of China thermal coal demand. In terms of supply, the coalmine production will be restricted by strict environment protection policy and safety inspections. As for coal prices, thermal power plants will oppose high prices and government will stabilize prices to sustain buying interest.

INTRODUCTION

Part 1: 2017H1 China Thermal Coal Market Review

1   Macro-economic Background

     1.1   GDP growth better than expected

     1.2   Heatedly debated topic: start of a new cycle or zenith of prosperity

2   Demand side: recovering economy driving up growth of thermal coal demand

     2.1   Thermal power generation increasing substantially YoY thanks to multiple favorable factors

     2.2   Iron & steel and cement output kept growing

     2.3   Traditional and modern coal-chemical sectors showing divergent trends of development

     2.4   National thermal coal consumption

3   Thermal Coal Supply: "stabilizing supply" (based on long-term mechanism) VS. "restricting production"

     3.1   Summary of implementation effect of coal industry decapacity policy in 2017H1

     3.2   Summary of the policies for "stabilizing supply" and "restricting production" in 2017H1

     3.3   New changes on provincial thermal coal output

     3.4   National thermal coal supply

4   Import and Export:China standing firm in restricting coal import

     4.1   Import: both import volume and price were on the rise; China gradually tightened up restriction of coal import

     4.2   Export: increasing export volume YoY

5   Transport Pattern: coal volume shifting from road to railway under the pressure from environment protection policy 

     5.1   By road: Bohai Rim ports ceased coal inflow and outflow by truck, marking a tightened restriction of road-borne coal transport

     5.2   By rail: rail coal volume increasing remarkably

     5.3   Transport cost: rail freight was going up while trucking freight remaining steady

6   Price Trend: ups and downs

     6.1   Reasons for price change

     6.2   Price trend at major production regions, transfer ports and end users

     6.3   Price gap between domestic and imported coals

     6.4   CCI price index variation trend

 

Part 2: 2017H2 China Thermal Coal Market Forecast

7   Demand Side: to register slight increase from 2017H1

     7.1   GDP growth to slow down in 2017H2: to dip to 6.7% in Q3 and Q4

     7.2   Demand from thermal power plants to remain flat or increase slightly: robust demand during peak season to fade away, and unit energy consumption to decline

     7.3   Demand from iron & steel mills to edge down: iron & steel making to remain under restriction to satisfy environment protection requirements; FAI into iron & steel industry to keep falling back, and unit energy consumption to keep declining

     7.4   Demand from building materials industry to drop: robust demand during peak season to fade away, and environment protection policy to tighten restriction of production

     7.5   Demand from coal-chemical industry to keep increasing: prices for chemical products tend to go up, and more coal-chemical projects will be proposed for planning

     7.6   Forecast of national thermal coal demand (2017H2 and entire 2017)

8   Supply Side: to register slightly increase from 2017H1

     8.1   Forecast of national total coal supply (2017H2 and entire 2017)

     8.1.1   Restriction of coal production to remain effective: environment and safety inspections to run through 2017H2   

     8.1.2   China to encounter mounting difficulties in resolving excess coal capacity: advanced coalmines to expedite capacity release to stabilize coal supply

     8.1.3   Coalmine M&A and signing of mid-to-long-term contracts to ease price fluctuations

     8.1.4   Forecast of national thermal coal supply (2017H2 and entire 2017)

     8.2   Imports to remain flat or decrease slightly, exports to remain steady

     8.3   Forecast of total thermal coal supply (domestic output and net imports) (2017H2 and entire 2017)

9   Transport Cost: to remain at downside

     9.1  Trucking freight to take a downward trend

     9.2   Rail freight to decrease: moderately loose rail capacity; administrative charges imposed on cargo flow to be lowered or revoked

10   Price Forecast: to fall back then stabilize in Q3 and go up in Q4 (winter storing season)

     10.1   Influencing factors

     10.1.1   Supply-demand: tight balance to remain so; prices to be greatly affected by market sentiment

     10.1.2   Policy: better performance of mid-to-long-term contracts and gradual release of advanced capacity to prevent the prices from rising too high or falling too low

     10.1.3   Market: coal prices to fluctuate along with changing seasonal demand; the policies for securing supply and stabilizing prices to ease the fluctuation of prices

     10.2   Forecast of thermal coal prices (2017H2 and entire 2017)

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