Coal prices have skyrocketed

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After entering 2018, coal prices continued to rise. To stabilize the coal market, large coal companies have taken the lead in reducing coal prices. 　　Since early January, large coal companies such as Shenhua, China National Coal Group, Shaanxi Coal Industry, and Yanzhou Coal have successively announced price cut policies to curb the rapid rise in coal prices. In addition to coal companies in the central region as well as in the key production areas of Shanxi, Shaanxi, and Inner Mongolia, major coal companies in Hebei, Henan, Shandong and other places have also successively reduced coal prices by 10 yuan per ton to 20 yuan per ton. 　　Regarding the reasons for the reduction in coal prices, the aforementioned coal companies all stated that since 2018, the supply and demand situation in the coal market has become tighter, with significant price fluctuations, placing considerable pressure on efforts to ensure a stable supply of coal at stable prices. As a state-owned enterprise, it should actively assume the social responsibilities of coal companies and take the lead in maintaining stability in the prices of thermal coal. 　　Although the price cut announcements issued by large coal companies and some private groups affected the entire coal industry, the market reacted little. After fluctuating at high levels for some time, coal prices did not fall as expected; instead, they resumed their upward trend. 　　It is understood that as of January 23: 　　In terms of transaction figures at the ports in the north, the average price of 5500 kcal thermal coal has risen to 750 yuan per ton; 　　For 5500 kcal thermal coal, the price at Datong’s ports remains unchanged at 505 yuan per ton, while the price at Ordos’ mines increased by 6 yuan per ton to 380 yuan per ton. The price at Yulin’s mines rose by 4 yuan per ton to 371 yuan per ton. 　　Coal prices have skyrocketed. Zhang Feilong, a researcher at the Yimei Research Institute, told media reporters that, against the backdrop of the relative separation between the long-term contracts offered by large groups and the market-based coal resources, price regulation through such long-term contracts does not fundamentally resolve or alleviate the shortage in supply and demand of market resources; as a result, its impact on the market prices of coal is minimal. 　　Looking at the overall coal market, coal supply is in a tight state. Especially in recent times, coal mines in some areas of the main coal-producing regions have been temporarily shut down, and it is expected that this shutdown will spread further, resulting in certain restrictions on coal production. 　　On the one hand, port supply continues to decline, while demand rises slightly due to stock replenishment by power plants downstream, resulting in an increasingly tight supply-demand balance. On the other hand, large coal companies reducing prices reflects the regulatory authorities’ desire to stabilize prices, and the tug-of-war between buyers and sellers causes continuous fluctuations in price levels. 　　It is worth mentioning that we are currently in the peak season for heating, and coal prices are unlikely to fall before heating ends in March. 　　After entering the twelfth lunar month, although expectations are high that the daily coal consumption by power plants will reach its peak, there are also significant expectations of production halts on the part of coal producers upstream. Against the backdrop of low inventory levels in the market, the expectation of weakened upstream supply has a significantly stronger impact on the market than the expectation of a decline in downstream demand. This has once again boosted the enthusiasm for rushing to transport coal from local mines recently, leading to a slight increase in prices. 　　Furthermore, the absolute inventory levels of power companies are relatively low, and there is still a need to replenish stocks before the New Year. Port inventories in coastal markets are also at low levels, and the tight supply and demand situation in the market remains unchanged. Especially in terms of second-tier ports, current inventory at the Yangtze River estuary is at its lowest level in nearly two years, resulting in a shortage of available goods. Author/Source: Ordos Coal Network