Coal market will continue to operate weakly in the second half of the year

In the first half of 2013, the coal market was in a bad economy. In the second half of the year, the pattern of loose supply of coal will not be fundamentally reversed. Given the certain degree of uncertainty in the economic situation, optimistic forecasts are expected to develop in the direction of supply and demand during the peak seasons; pessimistic forecasts will continue if the current financial turmoil continues. As a result, the local government and the real estate industry's tycoon model has been greatly affected, or even lead to a fundamental reversal of the real estate market, then the coal demand will drop sharply.

Coal market operating characteristics in the first half

Demand for coal is weak, and domestic supply is falling. Data from the China Coal Industry Association shows that from January to May, coal consumption increased by only 1.6% year-on-year, coal production decreased by 2.8% year-on-year, railway coal transportation volume decreased by 3.7% year-on-year, and major ports transshipped coal decreased by 1.1% year-on-year. From a month-on-month basis, the temperature at the beginning of the year was cooler than usual, and seasonal demand was at a relatively high level. Since February, seasonal demand has declined, and coal consumption has been on a downward trend overall, especially from April to May. Weakness and inventory constraints, coal production and transportation have shown a downward trend. According to analysis, average daily consumption, average daily production, and average daily coal transportation volume in the period from April to May fell by 3.3%, 5.9%, and 7%, respectively, from the first quarter.

Coal imports grew faster. From January to May, the coal import volume was 13.617 million tons, an increase of 20.9% year-on-year; the coal export volume was 3.59 million tons, a year-on-year decrease of 32.3%; the net import of coal increased the domestic supply by 25.03 million tons year-on-year. Average daily net imports from April to May increased by 3.6% from the first quarter.

The overall supply and demand of coal is loose. In the first four months, coal deposits in the entire society continued to rise, and the high level in May stabilized. Compared with the normal turnover, the coal storage level was basically normal in January and continued to increase in the following months. The coal deposit at the end of May was 24% higher than the normal level; The coal deposits in coal mines, ports, and power plants are 32%, 85%, and 30% higher than the normal coal storage levels, respectively, and only the steel deposits are basically normal. Excessive coal deposits indicate that market supply exceeds demand.

Market prices continued to fall. The average price of coal traded in the national market continued to fall since late February, reaching RMB 688.2/t at the end of May, down 4.7% from the peak in late February. The price of coal in the Bohai Rim Port has continued to fall since the fourth quarter of last year. The price in early July was 32.7 Yuan/ton lower than that at the end of October last year.

In summary, coal consumption and supply fluctuations have been declining since the beginning of this year. The coal price has been falling and the supply and demand of coal have remained loose. The coal market sentiment index has been in a cool interval and the recent decline has further increased. In May, the national coal market sentiment index was -32.7, down 5.1 basis points from April and down 17.9 basis points from the beginning of the year.

The main cause of the coal market downturn

The coal market is sluggish, and the dominant force is weak demand. The demand for coal is mainly driven by the investment in the troika that drives economic growth. The construction projects consume high-energy products such as steel and building materials, which are mostly in the construction phase of the main structure at the beginning of construction. Therefore, if the new construction starts to expand rapidly, coal demand will increase. It will show a strong trend, otherwise it will show a weak state. Among all types of construction clusters, real estate development exerts the greatest degree of pull on coal demand, followed by steel and cement, mining and other raw material heavy industry construction clusters and infrastructure construction clusters, and private capital investment in light industry, equipment manufacturing and other small and medium-sized projects. Clusters also have a certain pulling effect. Overall, the industrial structure and duration structure of construction projects can affect coal demand to a greater extent than investment scale.

In the third and fourth quarters of 2012, the total planned investment for new projects increased by 29.8% and 37.3% year-on-year, respectively. In the first quarter of 2013 and April-May, they increased by 14% and 16.6%, respectively. The growth rate is still considerable. However, an analysis of the industry structure of the investment shows that since the second half of 2012, the scale of new projects started to expand rapidly, and the scale of new projects with small projects that are smaller than the completion of projects is shrinking. The rapid increase in total investment in new projects is mainly due to the proportion of large projects. As a result of the increase, it cannot explain the rapid expansion of new construction. According to the construction period of different types of projects, it is judged that the scale of new construction starts shrinking.

Under the overall lack of new start-ups, new housing starts fell by 2.7% year-on-year in the first quarter of 2013, and from April to May increased by 5.5% year-on-year. However, according to analysis, this was related to the lower base year-on-year. On the whole, the real estate start-up momentum has increased in recent months compared with the middle period of 2012, but it is still at a relatively low level. Its pulling power for coal demand has picked up slightly, but it is still weak. The pressure on raw material heavy industry increased due to overcapacity, and the growth rate of investment continued to fall. It increased by 15.2% year-on-year from January to May and 5.4% from the same period of last year. It can be concluded that the scale of new construction of this construction cluster has shrunk significantly, which is a determinant of coal demand. .

From the climatic point of view, hydropower and wind power installed capacity grew rapidly, and hydropower water supply was better. From January to May, hydropower and wind power increased by 14.6% and 40.7% year-on-year, respectively, and were 10.6 and 36.7 percentage points higher than the increase in power generation respectively. Compared with the increase in total power generation, the electricity generated by hydropower and wind power increased by 22.8 billion kWh and 15.6 billion kWh respectively, saving a total of 18 million tons of coal consumption, which is also an important reason for the weak coal demand.

The coal supply capacity is sufficient, and coal imports have a comparative advantage. From the point of view of coal mine production capacity, it is now in the period of coal mine production capacity release. According to data from the National Bureau of Statistics, coal mine capacity for new construction started in 2011 was 607 million tons/year, the scale of coal mine construction reached 1.314 billion tons/year, and the new production scale reached 413 million tons/year. According to the construction period of coal mines, it is judged that the annual production capacity of new coal production in 2012 and 2013 will be around 400 million tons/year. From the perspective of transportation, many passenger railway lines have been put into operation in the past year. Central regional and western coal production areas have been continuously operating regional railway feeder lines, and the Shenzhou-Huang railway has been expanded, all of which are increasing the railway network transportation. The ability to collect and transport coal.

At the same time, the demand for railway transportation for “white goods” is at a relatively low level, making it possible to transport coal and transport capacity. This has significantly eased the bottleneck of railway supply to coal supply, and is basically sufficient relative to terminal demand. The domestic coal price is not superior to imported coal because of local fees and high circulation costs.

Coal Market Supply and Demand Analysis in the Second Half of the Year

The coal supply capacity is generally adequate. The sharp increase in coal production capacity and the steadily increasing transportation capacity are the basic patterns accumulated over the past many years and will not be fundamentally changed in the short term. Even if more efforts are made to prevent and control the security of the coal industry, the coal production will decline due to the fact that a large number of local coal mines have stopped or semi-discontinued. Space is also very limited.

At the same time, coal imports will still fluctuate at high levels. The price-to-equity relationship between domestic coal and imported coal tends to be even. Although there is no parity advantage, given the oversupply of domestic supply capacity, it is unlikely that a sharp increase in coal imports will be judged and will not be significantly reduced. As a whole, the effective supply of coal in the second half of the year was basically stable. Before and after the Third Plenary Session of the 18th CPC Central Committee, if the intensity of security prevention and control is significantly increased, the coal supply may gradually decline slightly.

The economic fundamentals of coal demand will continue to weaken. Since ***, macroeconomic control policies have also been given more priority in structural adjustment and transfer, rather than maintaining rapid growth by simply increasing stimulus. The recent tightening of the central bank's monetary control fully demonstrates the firm determination of the central government to adjust the structure and squeeze the bubble. The central government strives to revitalize the stock of money and guide social capital to invest more in the real economy. The excessive flow of funds into the local market and the real estate industry will also change. With the tightening of liquidity, the capital supply for infrastructure construction and real estate development will increase. It will be adversely affected. Although it is difficult to make a completely definite judgment on the degree of impact, it is still foreseeable that the pulling power of the two major construction clusters on coal demand will be weakened.

Under the condition that the supply capacity is generally sufficient, the future trend of the coal supply and demand situation mainly depends on coal demand, and the ultimate deciding factor is still the economic development situation in China. The author judges that there will be no major turbulence in China's financial market in the second half of the year. The real estate market is basically stable, and local infrastructure construction continues to advance steadily. Under such circumstances, weather conditions in the peak summer and winter coal seasons will clearly shape coal demand. Incremental, especially in the case of overlapping effects with the gradual fall in coal supply, the coal market is expected to develop towards the balance of supply and demand in stages, but the pattern of loose supply will not be reversed fundamentally; if the real estate industry and local governments provide funding There is a large gap, and at the same time climate factors also form a definite reduction in coal demand, coal demand will be lower than expected, and the coal market will experience greater excess pressure.