By Lin Huocan
The spot price of Qinhuangdao Port 5500 kilocalorie steam coal closed at RMB 672 yuan/t on CCTD on November 28, decreasing by RMB 6 yuan/t compared with that on November 25. The latest Bohai-rim 5,500 kilocalorie steam coal price index issued before was RMB 601 yuan/t (on November 23) and showed RMB 3 yuan/t of decrease compared with that of last week, which ended the previous continuous rising and has fallen for three consecutive weeks.
Generally, the falling of the coal price is caused by multiple reasons. From the supply side, the output of some main coal-producing regions and enterprises have increased, which showed a steady growth. In October, the output of main coal-producing regions has increased, in which, the output growth of Shanxi and Shaanxi have increased for 9.7 percent and 11.6 percent month-on-month respectively. Key coal-producing enterprises showed an obvious growth momentum, in which, the growth of Shenhua Group, China National Coal Group Corp., Yangquan Coal Industry (Group) Co., Ltd. have reached 10.5 percent, 23.6 percent and 44.8 percent month-on-month respectively.
Recently, the relevant state departments further cleared that all the producing coal mines that meet the safety production conditions shall resume 330 production working days before the end of the heating season. With the policies gradually being implemented, the continuous release of the safe, advanced and effective capacity of the state-owned enterprises as Shenhua Group and China National Coal Group Corp. as well as Shanxi, Inner Mongolia and Shaanxi, the output will increase more than 20 million tons in November and 27 million tons in December.
Meanwhile, with the gradually fallen of coal spot price, the steam coal futures as a reflection of the future coal price tendency have shown a sharp callback. The closing price for dominant contract of steam coal was RMB 611.2 yuan/t on November 28 in Zhengzhou Commodity Exchange, RMB 70.4 yuan/t lower than the previous stage. Social anticipation has obviously changed with the fallen of coal spot price and future price. Some coal dealer estimated that the coal price will further fall and the coal supply will be increased with an obvious selling growth of the pre-stockpile volume.
In terms of transport capacity assurance, national railway coal freight volume was 171 million tons in October with an increase of 6.6 percent and the growth rate was 4.6 percentage points higher than the previous month, which was the second consecutive positive increase this year. Among which, the coal freight volume growing rate of Inner Mongolia and other regions were above 20 percent. In the early period of November, the year-on-year growth of national railway coal loading volume and the coal freight volume were 8.8 percent and 9.8 percent respectively. The coal freight volume is still in a growth trend with the increase of national railway coal average loading volume.
In terms of highway and waterway transportation, the highway freight indexes of Ordos coal continuously fallen on the basis of last week plummets. The average price of long-distance automobile transportation is RMB 34 yuan/t per 100 km on November 25, with a decrease of 5.6 percent than last week; the average price of short-distance automobile transportation also showed a 7.5 percent decrease than last week. Highway freight price of coal in Shanxi and Shaanxi, etc. also decreased obviously. The waterway freight price has fallen back sharply.
In terms of the demand side, the long-term contracts of the coal and power enterprises have continually expanded with obvious effects of stable expectation. In early and middle period of November, Shenhua Group, China National Coal Group Corp. have successively signed medium and long-term contracts of 2017 with five major power groups of China Huadian Corporation, State Power Investment Corporation, China Huaneng Group, China Datang Group and China Guodian Corporation on the basic price of RMB 535 yuan/t. The contract will come into effect in December 1 of this year. These five power generation groups account for 44 percent of the nationwide in terms of total installed capacity, thermal power capacity and coal consumption, which have played a positive demonstration role. The local enterprises as Datong Coal Mine Group, Inner Mongolia Yitai Group Co., Ltd., Guangdong Yuedian Group Co., Ltd., Zhejiang Zheneng Electric Power Co., Ltd. have followed actively afterwards. Local government department in Shanxi, Inner Mongolia, Shandong, Shaanxi and Guizhou have also actively coordinate coal and power enterprises to sign the medium and long-term contracts as per the central key coal and power enterprises as soon as possible.
With the increases of the railway freight volume and decreasing of highway freight price as well as the expanding of the coal and power enterprises medium and long-term contracts, inventory of coal enterprises is constantly transferred to the users and the reserving coal of power plant has increased obviously.
In addition, the relevant department has implemented measures as optimize power operation mode, increase the volume of clean energy as hydropower, nuclear power, and wind power to alleviate the shortage of coal power in some regions recently. With the increasing and full capacity operation of clean energy, the coal power shortage in some regions has been effectively alleviated and the coal spot price has fallen back.