Selected Highlights on Energy Products

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The last edit to this post was made by yinkuilin6868 on 2016-6-14 at 17:29. Highlights in energy products: Imported coal is in demand, with prices expected to rise both in volume and value in the future. As China’s coal industry shifts toward reduced production levels, coal prices have seen a significant rebound, with an increase of up to 30 yuan per ton. The price advantage of imported coal is beginning to show, with downstream customers increasing their purchases of imported coal, resulting in an upward trend in both volume and price. Data monitoring shows that China imported 19.03 million tons of coal in May, an increase of 4.78 million tons compared to the previous year, representing a growth rate of 33.54% ； There was a month-on-month increase of 1.03 million tons, representing a growth rate of 5.72%. From January to May, China imported a total of 86.28 million tons of coal, an increase of 679,000 tons compared with the previous year, representing a growth rate of 3.7%. Looking ahead, as coal capacity reduction policies are implemented across various regions, a tight supply of coal is set to become the norm in the market. Coupled with the peak demand for coal during the summer season, there are strong expectations of rising domestic coal prices. Downstream users, particularly those in coastal areas, will increase their purchases of imported coal. Coupled with rising international shipping costs and the depreciation of the RMB exchange rate, the imported coal market is expected to see both an increase in volume and prices in the future. To support Beijing’s development plans, another pipeline will be added to the Shaanxi-Beijing pipeline network. According to public information, the sixth meeting of the second board of directors of China National Petroleum Corporation, held on June 8, approved a proposal regarding the construction of the Shaanxi-Beijing Line 4 gas pipeline project. According to the plan, the Shaanxi-Beijing Line 4 includes 1 main line and 3 branch lines. The main pipeline starts at the Shouzhan station in Jingbian, Shaanxi Province, passes through Inner Mongolia and Hebei, and ends at the Gaoliying station in Beijing. The total length of the pipeline is 1,082 kilometers, with a designed capacity of 25 billion cubic meters per year. It is expected that the main pipeline will be completed and put into operation by the end of October 2017. In 2014, three ministries issued the \"Work Plan for Strengthening Air Pollution Control in the Energy Sector.\" By 2017, Beijing had reduced its coal consumption by 13 million tons. As Beijing has reduced its coal consumption and promoted the shift from coal to gas, the share of natural gas in the city’s energy consumption structure has been increasing year by year. In 2015, Beijing’s natural gas consumption reached 13.854 billion cubic meters, accounting for 22% of the city’s total energy consumption – a figure that is close to the global average of 24%. Although Beijing currently has multiple gas supply sources, including the Shanjiing Lines 1, 2, and 3, the Yongtang-Qin gas pipeline, the Gangqing Line 3, the Tangshan LNG export pipeline, as well as the gas storage facilities in North China and Dagang, it is still not possible to fully meet the gas demand during the peak periods in winter. Once the Shaanxi-Beijing Line 4 is fully operational in 2017, it is expected to supply Beijing with 60 million cubic meters of natural gas per day, serving as a vital source to help the city optimize its energy consumption structure and advance the transition from coal to natural gas. Can China’s robust crude oil imports continue? According to data from China’s customs, China’s crude oil imports in May amounted to 32.24 million tons, a 39% increase on a year-on-year basis. However, they decreased by 4.3% month-on-month compared to April, reaching the lowest level since February this year. Meanwhile, according to data released in April, crude oil imported through Qingdao Port accounted for over 30% of China’s total crude oil imports that month, resulting in severe congestion of oil tankers at the port. For a while, whether China’s robust crude oil imports could continue became a matter of widespread concern among industry professionals. Firstly, in terms of the crude oil extraction costs of the \"big three oil companies,\" those of CNOOC’s offshore drilling platforms are the highest (with overall costs of around 43–45 dollars per barrel). Theoretically, given the current international oil prices, the operating conditions of domestic oil fields should improve significantly, and it is highly likely that these fields will move from losses to profits; moreover, there is a possibility that domestic crude oil production could start to recover. Secondly, international oil prices have been fluctuating upward recently, with the psychological threshold of $50 per barrel having been broken. As the main hub for private refineries in China, the cost for these refineries in Shandong to process imported crude oil has started to rise sharply, making it questionable whether they can continue to import large quantities of crude oil. Taking into account domestic oil field production and the crude oil imports by private refineries, it is highly likely that the intense pace of crude oil imports in China will slow down after May. Thermal coal: Back above the 400-yuan mark. The latest Bohai Rim Thermal Coal Price Index for June 8 showed a rise of 10 yuan per ton, closing at 400 yuan per ton after 10 consecutive weeks of stability. This marked the first time the index has returned to the 400-yuan level since it fell below that mark on September 23 last year. The market generally believes that the sharp rise in the index was driven mainly by several large coal companies jointly raising the selling prices of thermal coal for June, with substantial increases and a firm commitment to implementing those raises. Since March this year, most provinces in southern China have experienced heavy rainfall, with the area affected by these rains continuing to expand. Precipitation levels in many areas have reached new highs for the same period in recent years. The abundant rainfall has led to an increase in hydroelectric power generation, which has put significant pressure on the thermal power market and thus reduced demand for coal used in electricity production. Since the beginning of this year, the daily coal consumption of the six major power plants along the coast has been far below the levels seen in the same periods in previous years, reflecting clearly the weak demand on the downstream side. Following past trends, power plants will gradually enter the traditional coal stockpiling period for the peak summer demand period between June and July, and it is expected that these periodic stock replenishments by power plants will drive demand to some extent. At the same time, as the effects of production restriction policies in various major coal-producing areas gradually take effect, coal production is expected to decline further on a month-on-month basis in June. The boost from both supply and demand will provide significant support for the thermal coal market; coal prices may still have upward momentum in the future, but limited room for recovery exists due to weak demand.