浙江之源资产评估有限责任公司
The nationwide coal market prosperity index saw a significant rebound in March.
Release time:
2017-05-05
Source:
National Coal Industry Network, 2017-04-25
In March 2017, influenced by factors such as the recovery of the macroeconomy, a rebound in industrial production growth, and a decline in hydropower generation, thermal power generation grew relatively rapidly year-on-year, while steel production saw a slight increase, driving continued growth in coal demand. Although coal production growth lagged behind demand, overall societal inventories remained relatively low, resulting in a generally balanced yet slightly tight coal supply-demand situation. Market sentiment remained largely pessimistic, though the nationwide coal market’s prosperity condition showed some improvement, with the prosperity index remaining within the normal range. Since April, coal supply has increased month-on-month, while coal demand has declined month-on-month. As a result, societal coal inventories are expected to rise somewhat, and coal prices have fallen slightly. It is forecast that the market prosperity index for April will decline.
I. Basic Situation of the Coal Market Prosperity Index for March
In March, the nationwide coal market prosperity index stood at 7.5 points, a significant rebound from the average of -7.5 points in January and February. The overall economic conditions have improved somewhat, and the index now falls within the generally normal range.
Figure 1: Trend Chart of the Coal Market Prosperity Index Since 2014
(1) The demand deviation index has returned to the normal range. In March, the economic situation was better than expected: the value-added of industrial enterprises above designated size increased by 7.6% year-on-year in real terms, accelerating by 1.3 percentage points compared to January-February. Month-on-month, March’s growth reached 0.83%. Nationwide power generation by large-scale power plants increased by 7.2% year-on-year; among them, hydropower generation declined by 1.3%, while thermal power generation rose by 7.7%. Pig iron production grew by 1.3% year-on-year, and cement production rose by 0.3% year-on-year. Supported by the growth in output of key coal-consuming products such as thermal power and pig iron, monthly coal consumption growth rebounded by about one percentage point compared to January-February. As a result, the demand deviation index for March stood at 10.0 points, reaching the upper limit of the normal range—a significant rebound of 11.4 basis points from the average of January-February, which was -1.4 points.
Figure 2: Trend Chart of the Coal Market Demand Deviation Index Since 2014
(2) The supply-demand balance index has been steadily rebounding. In March, as coal mines resumed operations following the Spring Festival holiday and advanced production capacity was accelerated, raw coal output from enterprises above a designated size increased by 1.9% year-on-year, and coal imports rose by 12.2% year-on-year. Driven by the growth in output of major coal-consuming products, the pace of coal demand picked up somewhat. Coal inventories across the entire society continued to decline, and the number of days of coal stocks held fell slightly, resulting in a slightly tighter coal supply-demand situation for the month. In March, the supply-demand balance index stood at 11.1, an increase of 6.3 basis points from the previous month’s final value of 4.8.
Figure 3: Trend Chart of the Coal Market Supply-Demand Balance Index Since 2014
(3) The market expectations index showed a marked rebound. In March, coinciding with the Two Sessions, major coal-producing provinces stepped up safety inspections at coal mines, and key... Port Key users have relatively low coal inventories, and market participants’ purchasing enthusiasm has picked up somewhat. As a result, the market expectation index has shown a noticeable rebound, reaching -16.6 for the month—a significant improvement of 10.8 basis points from the average of -27.4 for January and February.
Figure 4: Trend Chart of Market Expectations Index Since 2014
(4) The price deviation index remains within the normal range. In March, in the Bohai Rim region, power... Coal price Grades have risen; coking. Coal price Relatively stable, and considering the consecutive price declines over the previous two months, the coal price deviation index for the current month stood at 7.2, remaining within the normal range.
Figure 5: Trend Chart of the Coal Price Deviation Index Since 2014
II. Forecast of the Coal Market Prosperity Index for April 2017
(1) Coal Demand: In the first quarter, coal demand was bolstered by two overlapping factors—the lingering effects of last year’s real estate recovery and the concentrated launch of PPP projects. First, real estate development continued to provide strong support for coal demand. In the first quarter, real estate development investment and new housing construction starts increased by 9.1% and 11.6% year-on-year, respectively, with growth rates up by 0.2 and 1.2 percentage points from the previous quarter. Second, the end of 2016 and early 2017 saw a peak in the implementation of PPP projects. As a result, infrastructure investment in the first quarter rose by 23.5% year-on-year, remaining at a relatively high level. Looking ahead, as the state continues to intensify its regulatory efforts to curb real estate speculation, expectations of rising housing prices are likely to change. We expect the growth rate of new housing construction starts to slow down in the second quarter. However, it is unlikely that the momentum will significantly weaken in April itself; thus, the pull of real estate development on coal demand will persist. After peaking in January 2016, the number of PPP project initiations has fallen sharply. Given that it typically takes about 13 months from project initiation to completion, we anticipate that the scale of PPP project starts may decline noticeably in the coming months. Nevertheless, the carryover effects of the earlier concentrated start-ups will continue to be evident throughout April and into the entire second quarter. We judge that in the second quarter, the underlying economic fundamentals will still provide substantial support for coal demand, though this support will gradually weaken. From a seasonal demand perspective, with the end of the heating season in April and hydropower generation entering an upward trend month-on-month, coal demand driven by climatic factors will enter a trough. As of April 10, the average daily coal consumption at key power plants nationwide was 3.07 million tons, down 3.9 million tons from the previous month—a decrease of 11.3%. Overall, we expect coal demand in April to decline slightly month-on-month, while year-on-year growth is likely to remain positive. The growth rate, however, is expected to slow down compared to March, and the coal demand deviation index will also show a downward trend.
(2) Supply-Demand Relationship: In April, local coal mines gradually resumed production and operations, leading to a rebound in coal output. Meanwhile, coal demand is expected to decline slightly month-on-month. Consequently, coal inventories across the entire society are likely to rise. As of April 10, coal stocks at key power plants increased by 0.4% compared to the end of the previous month, with the number of days’ worth of stock rising by one day. As of the 13th, coal stocks at the six ports around the Bohai Sea had risen by 4.2% compared to early March. Considering the inventory changes over the first two months, we expect the supply-demand balance index for March to decline slightly but remain within the normal range.
(3) Market Expectations: Recently, the national government has held a series of meetings demanding guaranteed coal supplies, and coal-producing regions have significantly increased production. On April 17, Shenhua Group took the lead in lowering spot sales prices by 5 yuan per ton, sending a downward signal to the market to some extent. Since mid-March, domestic sea... Shipping fee Entering a downward channel, the cumulative decline has reached 34%. Against the backdrop of electricity demand entering the off-season, downstream procurement is gradually returning to rationality. These factors could push market expectations further toward a more pessimistic outlook, and we anticipate that the market sentiment index will decline in April.
(4) Market Prices: Since April, national coal prices have slightly declined. On April 19, the index stood at 158.9, down approximately 0.1 basis point from the end of February. On April 17, the 5,500 kcal “CCTD”... Qinhuangdao The price of thermal coal stood at 652 yuan per ton, down 7 yuan per ton from April 3. It is expected that the coal price deviation index for April will slightly decline.
Based on the above analysis, the four underlying indicators of the national coal market prosperity index are likely to decline to varying degrees. We forecast that the national coal market prosperity index will fall in April, but it will still remain within the generally normal range.
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