Abstract

Basic Viewpoints:

In September 2020, domestic coal market was robust.

In the coking coal market, capacity utilization rate of coking plants stayed at a high level. Downstream coke price kept increasing driven by strong demand on domestic coking coal. Enjoying satisfied profit, some coking enterprises increased coking coal inventory and were more active in purchasing.

In the thermal coal market, price at ports surged; decreasing inventory led to short supply; price at origin was at a high level; that at pitheads increased boosted by short supply.

In the PCI market, price of coal from large mines on a long-term contracted basis was stable while that at ports and in some coal mines rose amid stability.

In September, price of Australian coking coal and PCI surged, of which standard I grade coking coal rose by $32.5-34 per ton, which was basically the same as domestic price. However, imported coal had to endure long delivery and increasing risks.

It’s expected that domestic coking coal price will be mainly stable within a growth of 50 yuan; price of PCI will be stable, and that in some regions will go up and down; price growth of domestic thermal coal at ports will slow down while that at production area will stay strong.

1. Coal price in September stayed at a high level

In September, coal market was robust and each type of coal price increased differently. As of September 25, SteelHome Coal price index (SHCNCCI) was 1264 yuan/t, up 15 yuan from the end of last month. Price of domestic coking coal rose by 2 yuan to 1282 yuan/t; that of imported coking coal jumped by 319 yuan to 1010 yuan/t; that of PCI price index (SHCNPCI) grew by 3 yuan/t to 815 yuan/t, down 0.37% from last month; price index of thermal coal was advanced by 7 yuan/t to 553 yuan/t, falling 1.28% from last month.

Table 1：SteelHome Coal Price Index from June to September (yuan per ton)

1.1 Price of coking coal increased amid stabilities

Price of coal from large mines on a long term contracted basis was stable; that from market went up amid stability.

In terms of Shanxi Coking Coal Group, production and sales were both stable; inventory at ports decreased; price of coal in the third quarter on a long-term contracted basis transported by train was stable. It’s expected that long-term contracted price will be stable in the fourth quarter.

In terms of Shanxi Luan Group, price of lean coal on a long-term contracted basis dropped by 20 yuan.

Price of gas coal and 1/3 coking coal from large mines in Shandong for market customers rose by 10-20 yuan; that in local mines grew by 10-50 yuan.

Price of low-sulfur coking coal (G80) in Linfen, Shanxi rose by 20 yuan/t; transaction price of 1/3 coking coal rose by 20-30 yuan/t; price of low-sulfur coking coal in Changzhi increased by 30-50 yuan; that of high-sulfur coking coal rose by 10-20 yuan in Liulin rose by 10-20 yuan/t; that of low-sulfur coking coal in Gujiao rose by 30 yuan; that of mid-sulfur rich coal grew by 20 yuan.

Price of gas coal and premium ones rose by 20-40 yuan in Shandong; that of gas coal in Zichang, Shaanxi rose by 50 yuan/t; that in Huangling went up by 20 yuan/t; that of coking coal in Wuhai, Inner Mongolia rose by 40-50 yuan; that of 1/3 coking coal edged up by 20-30 yuan.

Table 2: SteelHome China Coal Price Index from June to September, 2020 (yuan per ton)

Source: SteelHome Database

Quotations of imported coking coal surged. Price of Australian I Grade coking coal rose by $31 to $148.5-149.5 from last month; that of standard I grade coking coal rose by $32.5-34 to $140-142.5 per ton; that of II grade coking coal rose by $27.5-28 to $125-126 per ton; that of semi-soft increased by $8.5 to $82-84 per ton.

There were three reasons to this surge in imported coal quotations. The first one was that 30% blast furnace resumed production as global economy was recovering from COVID-19. In Asia, purchase volume of overseas coking coal by Japan, South Korea and India increased.

The second was that annual quota for imported coal did not exhaust yet. Customs clearance is still difficult now.

The last one was that customs quota left can be used next year, even though Australian coal can’t be cleared by the customs this year. However, this claim was unfounded. There was still uncertainty to later customs clearance. For traders, it's still risky and for coastal steel mills, imported coal price still had advantages over domestic coal. Taking northern ports as an example, there was basically no Australian coking coal in stock. Coal which was scheduled to arrive by June 1 was not be cleared yet.

Price of Mongolian coal increased slightly by 10-20 yuan. Downstream purchase volume increased driven by great price advantages.

1.2 Price of domestic PCI was stable

Price of domestic PCI was stable, and that of imported PCI surged. Price of long-term contract in Henan, Shanxi, Anhui and Hebei was stable; that of market coal went up amid stability.

Price of anthracite from some coal mines in Changzhi rose by 10-30 yuan/t; that of PCI at Yangtze river ports increased by 10-20 yuan/t; that of PCI bituminous (A7, V35) at Taihe Port in Jingjiang, Jiangsu picked up by 20 yuan to 685 yuan/t; that of PCI anthracite in Siberia, Russia increased by 15 yuan to 780 yuan/t.

Price of PCI from large mines to Shandong, Jiangsu inched up by 10-40 yuan/t; that at Rizhao Port was 840-860 yuan/t (in cash); that at Jiangsu Port was 810-820 yuan/t (in cash).

Quotation of imported PCI soared. Price of Australian coal advanced by $13-14 to $90.5-95.5 per ton. In terms of steel mills, inventory increased after falling. This month, monthly demand of anthracite in 70 steel mills increased by 30,000 t to 3.611mn t; inventory rose by 11,000 t to 2.128mn t; available days dropped by 0.1 day to 17.5 days. Bidding price of some steel mills in Qianan, Hebei increased; that of anthracite in September jumped by 21 yuan to 859 yuan/t and that of PCI bituminous grew by 70 yuan to 703 yuan/t.

Table 3: China PCI Price from June to September, 2020 (yuan per ton)

Source: SteelHome Database

1.3 Price of domestic thermal coal was high

In September, domestic thermal coal market was robust; quotation at Northern Ports grew dramatically; price at origin continued to increase.

Early this month, Shenhua issued quotation on long-term contract price in September; price of coal on a monthly long-term contracted basis transported via water dropped by 1-22 yuan, of which thermal coal (5500K) price dropped by 17 yuan to 555 yuan/t; that of coal (5000K) decreased by 21 yuan to 495 yuan/t, lower than market price; annual long-term contracted price dropped by 1 yuan/t.

In terms of production area, National Coal Mine Safety Administration lunched comprehensive inspection on 11 provinces on September 14. Meanwhile, coal supply went into shortage because of upgraded inspections on main production area and coal mine operation limits. Price at pitheads kept increasing.

Inventory, on the other hands, was at a low level. Price of transporting coal to ports climbed up, thus traders were not active in coal out-shipping.

At northern ports, inventory was lower than expectation since delivery did not catch up with shipping early this month.

Coal demand was expected to be strong. Later power plants will welcome replenishment for the upcoming winter.

As of September 25, price of thermal coal (5500K) at Qinhuangdao Port was 595-600 yuan/t, up 42 yuan or 7.53% from last month; that of coal (5800) in Jincheng, Shanxi was 535 yuan/t (out of mine), up 10 yuan or 1.9% from last month; that of coal (5500K) in Guangzhou was 680 yuan/t, increasing 20 yuan or 3.03% from August (out of mine).

As of September 27, price of thermal coal at Australia Newcastle port was $ 52.8 per ton, up $3.05 per ton from $52.05 last month; that of thermal coal at South Africa Richard Port was $57.2 per ton, up $2.55 per ton from $54.65 last month; price of thermal coal at Rotterdam Port, Netherlands was $52.25 per ton, up $2.65 per ton from $49.6 at the end of last month.

Table 4: China Thermal Coal Price from June to September, 2020 (yuan per ton)

Source: SteelHome Database

2. Coal supply fell

2.1 Daily output of raw coal up in August

According to National Bureau of Statistics, China raw coal output above designated size reached 325.81mn t in August, down 0.1% year on year; daily output registered 10.51mn t, up 253,900 t or 2.48% from last month.

Raw coal output from January to August achieved 2450.42mn t, down 0.1% on the year, which was the same as that in January-July. Annualized output totaled 3.665587 trillion tons, lower than last year

In August, raw coal output in Shanxi was 94.777mn t, up 11.8% on the year. Output in January-August was 675.864mn t, up 4.1% from last year. Monthly and cumulative output were both higher than national level.

During January-August, raw coal output in Inner Mongolia was 633.514mn t, down 10.4% from 2019, of which output in August was 80.111mn t, down 13.4% from last year. Its monthly and total output were both lower than national level.

2.2 Coal imports in September kept falling

According to customs statistics, imported coal in August was 20.663mn t, down 12.289mn t or 37.29% from last year and falling 5.437mn t or 20.83% from last month.

From January to August, China cumulative coal imports was 220.753mn t, up 0.2% from prior year. Annualized imports totaled 330.225mn t, higher than 299.674mn t last year.

In August, coal imports achieved $1.3898 trillion, falling 47.2% on the year and 19.93% from last month. Unit price averaged $67.26 per ton, down $12.61 per ton from last year yet up $0.76 per ton from last month. Imports in January-August totaled $15.5169 trillion, down 10.9% from previous year.

3. Coal inventory fell amid stability

3.1.1 Coking coal inventory in coking plants was at a high level

As of September 24, capacity utilization rate of 100 coking plants calculated by SteelHome rose by 0.77% to 89.15% from last week. Dramatic growth was saw in Northeast and Southwest China. Blast furnace in Guizhou resumed production already.

Meanwhile, available days and inventory both increased driven by increasing profit and active replenishment.

At present, coking coal inventory in coking plants is higher than normal level.

As of September 24, coking coal inventory in 100 independent coking plants calculated by SteelHome was 7.586mn t, up 299,500 t or 4.11% from 2019 average and up 13.73% from previous year.

Blast furnace operating rate was 94.79%, falling 0.75% yet still at a record high level, giving firm support to raw fuel demand.

3.1.2 Coking coal inventory at ports fell

As of September 25, China imported coking coal inventory at five major ports was 3.91mn t, down 350,000 t or 8.22% from 4.26mn t last month. Regulations on imported coal was still strict and tradable resources was still in shortage.

Table 5: Imported coking coal inventory at China major ports in September (0,000 tons)

3.2 Coal inventory at six ports fell

As of September 25, China coal inventory at six major ports was 18.2415mn t, down 3.011mn t from 21.2525mn t on August 24. Coal inventory at Qinhuangdao Port was 5.035mn t, up 10,000 t from 5.025 on August 24.

Table 6: Coal inventory at China major ports in September (0,000 tons)

4. Analysis on domestic coal market in October, 2020

Recently, private coal mines at origin were impacted greatly. Traders were reluctant to deliver coal onto yards since the cost went higher, thus coal inventory at ports was in shortage. Given that winter is coming, traders in Northern China started to stock up coupled with that resumed production in Golden September drove coal demand increasing, thus overall quotation went higher. Short supply can’t be relieved in a short time. It’s difficult to pile up at ports around Bohai sea.

Price of low-sulful coal (5500K) at northern ports exceeded 600 yuan/t into alarming red zone, which later may see regulations. It’s expected that price growth of domestic thermal coal at ports will slow down while price at origin will stay at a high level.

In the metallurgical coal market, blast furnace and coking ovens operating rate together with capacity utilization rate were all at a high level, indicating great demand on raw fuel. Profit of coking enterprises was favorable after 100-yuan hike. It’s expected that short supply of metallurgical coal can’t be eased recently and coke market will still be robust.

Entering into the fourth quarter, coal output will decrease from the second and third quarter because that safety inspections increased and some coal mines completed annual coal output target in advance. It’s expected that domestic coking coal price will be stable in October within 0-50yuan hike; PCI price will be stable while that in some regions may fluctuate.