Coal Market Report (September 8-12)

The coal market has gradually stabilized.

Port Sector

End-user demand remained weak, with strong willingness to push down prices and trading volume staying at a low level, leading coal prices to continue their downward trend. However, due to the inverted cost of coal transportation from production areas to ports and the shortage of high-quality coal supplies at ports, traders have become more inclined to maintain prices. As a result, the decline in coal prices has slowed down compared with last week, and the overall market sentiment has improved.

Production Area Sector

Long-term contract demand and non-power sector demand in production areas remained stable. Traders adopted a cautious approach to procurement, and the growth in incremental demand was limited. Coal mines adjusted prices based on the volume of coal hauled, and the overall market showed signs of improvement.

It is expected that the market coal price will fluctuate within a narrow range in the short term. On one hand, due to the inverted transportation costs, coupled with low port inventory and shortage of high-quality coal, traders are likely to maintain their stance of price support, and quoted prices may edge up. On the other hand, downstream electricity consumption has entered a seasonal decline phase, and end-users have insufficient motivation for procurement, so their acceptance of price increases is expected to be limited.

Bohai Rim Ports

The port market remained stable with a slightly weak bias. Due to the inverted transportation costs, the replenishment of port inventory has been slow; combined with the shortage of high-quality coal, traders’ willingness to maintain prices has rebounded, slowing the decline in coal prices. However, current end-user demand is still poor, with the number of ships anchored at ports remaining low and market transactions scarce. Future market trends will depend on the performance of end-user demand.

East China Region

The thermal coal price in the region remained stable with a slightly weak bias. Coke enterprises have resumed production; in addition, the coking coal price has been operating weakly, reducing the cost of coal used in coke ovens. This has boosted production enthusiasm and continuously increased coke supply. Nevertheless, steel mills are currently only replenishing inventory based on rigid demand. Meanwhile, the profits of steel mills have also declined compared with the previous period. A round of coke price cuts was implemented this week, and the market still expects a second round of price cuts. Future developments will focus on the demand from steel mills.

Key Terminology Explanations

Inverted cost (of transportation): A situation where the actual transportation cost exceeds the price difference between the origin and destination, making the business of transporting goods unprofitable (e.g., the cost of transporting coal from production areas to ports is higher than the price gap between coal at production areas and ports).

Long-term contract demand: Demand fulfilled through long-term agreements (common in the coal industry), which helps stabilize supply and price fluctuations for both buyers and sellers.

Rigid demand (for inventory replenishment): The minimum amount of inventory a company needs to purchase to maintain normal production and operation, not driven by speculative motives.

Thermal coal vs. coking coal:

Thermal coal: Mainly used for power generation, heating, etc.

Coking coal: Used to produce coke, a key raw material for steelmaking.