Large coal companies collectively reduce prices to ensure a stable supply in the thermal coal market

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From January 10th to 11th, seven major coal companies including Shanxi Yangmei Group and Jinneng Group announced a reduction in the price of thermal coal by 15–20 yuan per ton. Subsequently, large coal companies such as **Energy Group and China Coal Group also joined the trend of reducing prices, with the list of companies that reduced their prices expanding from the main production areas like Shanxi, Shaanxi, and Inner Mongolia to regions such as Hebei, Henan, and Shandong. According to incomplete statistics, 20 large coal companies have so far publicly announced price cuts on coal in order to reduce the purchasing pressure on the power generation industry. Affected by this, on January 17, the Bohai Rim thermal coal price index closed at 578 yuan per ton, remaining unchanged on a month-on-month basis. In the latest issue of “CCTD Qinhuangdao Thermal Coal Prices,” the prices of all three types of spot thermal coal stopped rising. The marine coal freight index, which had been at high levels, has seen a significant decline recently, with freight rates falling across various shipping routes. Data shows that from January 1 to 12, the average daily consumption of thermal coal by the six major power generation companies in coastal areas reached a high level of 741,000 tons, an increase of 16.6% on a year-on-year basis. However, the number of days during which thermal coal stocks could cover demand remained low, at less than 14 days, resulting in significant purchasing pressure on thermal coal for these major power generation companies. Meanwhile, data released recently by the General Administration of Customs show that in December 2017, China imported 22.74 million tons of coal, a decrease of 4.1 million tons or 15% compared to the previous year. The expected role of imported coal in supplementing the domestic market has not yet become apparent. Analysts believe that large coal companies’ voluntary reduction in coal prices helps to reverse the situation of excessive price increases in the market, stabilize market expectations, and boost activity in spot transactions. Analyses suggest that this is the second time in recent years, during peak coal demand periods, that large national coal companies have voluntarily reduced the prices of thermal coal. At the end of September 2017, China Coal Group and then-Shenhua Group took the lead in reducing market coal prices by 10 yuan per ton. Subsequently, the price of coastal coal, which had been rising rapidly, reached a turning point in mid-October of that year. Compared to the last time, a wider range of coal companies are participating in this price cut, and caution and hesitation in the market have increased. Furthermore, with the Spring Festival approaching, the weather in regions such as East and South China is warming up first; as a result, demand for domestic heating and industrial electricity declines significantly. The tight supply situation in the market gradually eases, and coal prices are likely to fall step by step and stabilize over time.