Shenhua raises coal prices for August; has stopped spot sales for three consecutive months

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Currently, the coal market is characterized by opposing forces, and coal prices are expected to reach a turning point after fluctuating at high levels. Reporters from the Securities Daily learned that yesterday, Shenhua announced its coal pricing plan for shipments in August; under this plan, the annual contract price for coal with a calorific value of 5500 kilocalories is 565 yuan per ton, an increase of 8 yuan per ton compared to the previous period ； The monthly long-term contract price is 583 yuan per ton, up 13 yuan per ton on a month-on-month basis. In the past, as a price indicator in the coal market, Shenhua’s monthly pricing had a strong influence on market trends. However, the price set by Shenhua this time actually doesn’t carry much significance; the coal price in August is mainly determined by market demand, as September and October are off-peak periods for coal usage, and traders who stock up on coal won’t wait that long. Some industry insiders also point out that, in fact, the spot market price in July had already risen to 650 yuan per ton. After Shenhua’s price adjustment, it still holds a certain advantage compared to the current market price; therefore, an increase in the prices for long-term contracts will not have a significant impact on coal prices in August. It should be noted that Shenhua will continue to suspend the sale of spot thermal coal in August. This is already the third consecutive month that it has implemented this sales policy. Currently, the supply of spot coal is still quite tight. However, during this period, no power companies will purchase spot coal; they mainly opt to buy coal under long-term contracts. The power plant is no longer in a hurry either, as the daily consumption has started to decrease. Since entering the peak period for coal consumption during the summer, the supply of coal has remained tight, with large coal companies such as Shenhua mainly supplying coal under long-term contracts. Shenhua stated that since the beginning of this year, there has been a tight supply of coal in the market and a decline in hydroelectric power generation. As a result, demand for thermal coal in China has risen sharply, leading to fluctuations in market prices. Shenhua Sales Group actively adapts to market changes, aiming to stabilize prices while increasing sales volume. It continues to rely on medium- and long-term contracts as its primary sales model, and in accordance with the purchase and sale agreements signed with customers at the beginning of the year, it fulfills all the contractual obligations to ensure a steady supply of coal for its downstream customers. From January to June, the fulfillment rate of Shenhua’s annual price contracts for coal shipped by water exceeded 100%. Shenhua also stated that, once the period of dealing with peak demand during summer begins, in order to ensure the fulfillment of long-term contracts, its spot sales operations at the seven ports in the north will not be carried out, and its spot prices will remain unchanged. At the same time, Shenhua Sales Group also sets prices in accordance with contractual rules and **policy guidelines, striving to leverage the guiding role of market prices. The annual prices under long-term contracts are set in accordance with the pricing rules specified in the contract, while the monthly prices under such contracts are determined based on **price guidelines; this approach plays an important role in maintaining relative stability in coal prices. For power companies, as the high temperatures subside and demand decreases, inventory levels are not as tight, so they tend to purchase coal through long-term contracts. Although supply from the production areas was temporarily tight due to heavy rains there and safety inspections, **the relevant authorities actively coordinated all parties involved in production and transportation to ensure an adequate supply of coal during peak periods. With a high rate of compliance with long-term contracts, power plants have little incentive to purchase coal from the market at higher prices. Currently, the market is not enthusiastic about high-priced coal; mainstream power plants still rely mainly on long-term contract coal. While coal prices at coastal ports have risen, trading volumes have decreased. Coal prices have remained high in the short term; the hot weather in recent days has cooled down slightly, affecting enthusiasm in the coal market. Since power plants mainly purchase coal through long-term contracts, there are significant disagreements in the coal market at present, with port coal prices remaining stable at high levels. The hot weather continues, and coal prices are expected to rise further during the peak season before experiencing a short-term decline.