• 2016-2017 China Thermal Coal Market Analysis and Forecast

  • Cycle of publication: Annual

    Date of completion: Jan 26, 2017

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The year 2016 has witnessed dramatic changes upon China coal industry: the State Council issued opinions to resolve overcapacity, followed by provincial mandate for exercising 276 workdays among all coal mines. Such intensified effort has tightened domestic coal supply, triggered soaring prices after a 4-year consecutive decline and also boosted imports. But recently, the NDRC gave permit to more qualified mines to resume 330 workdays for securing supply in heating season and stabilizing prices.

In such context, market players and observers both home and abroad have expressed deep concerns for China coal industry in 2017. Our annual report series (for coking/thermal coal) will address these concerns by guiding readers to review developments of China coal market in 2016 and look ahead into the coming year. This report will be presented in form of PPT.


Part 1: 2016 China Thermal Coal Market Review

1   Macro-economic Background

     1.1  GDP growth geared down, energy structure took on a new look

     1.2  Less energy use for GDP growth and also decreasing fossil energy consumption proportion

2   Thermal Coal Demand - year’s total increase more than expected

     2.1  Thermal power output increasing on year - declining generating hours coexisting with expanding installed capacity

     2.2  Iron & steel and cement output kept growing - attributed to continuous capital input into real estate market and infrastructure

     2.3  Chemical output increasing steadily - both traditional and new-type chemical sectors maintained steady development

     2.4  National total thermal coal consumption

3   Thermal Coal Supply - from “decapacity” to “stabilizing supply”

     3.1  Changes on thermal coal capacity and output - integrating with the context as “decapacity”, “cutting output” and “stabilizing supply” at different stages

            3.1.1  Resolving overcapacity to optimize coal industry structure

            3.1.2  Cutting output to restore coal miners’ profitability 

            3.1.3  Stabilizing supply to rein in soaring prices by resuming 330 workdays for qualified mines

     3.2  Thermal coal capacity and output by province

     3.3  Thermal coal capacity and output in key production regions (Shanxi, Shaanxi and W. Inner Mongolia)

     3.4  Thermal coal stock in production provinces, transfer ports and destinations

     3.5  National total thermal coal supply

4   Import and Export Volume - logic analysis behind remarkable import increase

     4.1  Imports - large inflow to make up for domestic short supply and new changes on import pattern

     4.2  Exports - increasing exports on year but still low

5   Transport Pattern - by rail and road

     5.1  By road - affected by rainstorms, tight supply and strict management of vehicle overloading with a result of greatly rising trucking freight

     5.2  By rail - short of available rail wagons further tightened coal supply with a result of cancelled rail freight discount

     5.3  Coal transport pattern took on a new look - Huanghua Port rose to China’s top energy transfer port, Inner Mongolia reduced lignite outflow, coal volume via Daqin Line plunged on year

6   Price Trend - soaring prices (driven by production cut and low stock) show signs of trending down after more mines resume 330 workdays

     6.1  Logic behind price change - resolving overcapacity, cutting output, stabilizing supply

     6.2  Price changes at major production areas, transfer ports and destinations

     6.3  Domestic and imported coal price gap

     6.4  CCI price index variation trend


Part 2: 2017 China Thermal Coal Market Outlook

7   Thermal CoalDemand to Remain Flat or Rise Slightly

     7.1  GDP to maintain “L” - shape growth and rise by about 6.5%

     7.2  Demand from thermal power generation to remain flat or increase slightly - rapid development of renewable and clean energy continues to weigh on thermal power with lower generating hours and unit coal burn, despite of expanding installed capacity

     7.3  Demand from iron & steel to edge down - crude steel output to fall slightly as result of continuous elimination of outdated steel capacity and strict environment protection requirements

     7.4  Demand from building materials to drop slightly - mainly attributed to declining cement output, industrial restructuring and decapacity

     7.5  Demand from chemicals to continue increase - owing to expected chemical output growth, rebounding crude oil prices and newly planned capacity

     7.6  Forecast of national total thermal coal demand

8   Thermal Coal Supply to be Moderately Loose on the Whole

     8.1  Continuous implementation of decapacity policy and using “276 workdays” flexibly to control coal supply

            8.1.1  Safety, efficient and large-sized coal mines to continue 330 workdays

            8.1.2  Overproducing, consolidated mines and those having completed construction but not approved will still be restricted

            8.1.3  The mines with small capacity, exhausting resource, unsafety production condition or inferior coal products to accelerate elimination

            8.1.4  Frequent safety accidents lead to strict supervision and administration by competent departments on mine production and safety

     8.2  Supply forecast in 3 scenarios (including operating capacity, closed capacity, newly-added capacity and output)

            8.2.1  Tight supply in scenario 1 due to continuous and strict implementation of 276 workdays

            8.2.2  Moderately loose supply in scenario 2 due to adoption of 330 workdays by qualified safety mines

            8.2.3  Supply glut in scenario 3 due to adoption of 330 workdays by all mines

     8.3  Imports to drop slightly with exports flat with 2016

     8.4  Forecast of total thermal coal supply - domestic output + net imports

9   Transport Cost Tends to Go Up

     9.1  Trucking freight to take an upward trend

     9.2  More available rail wagons put into use along with shrinking freight discount

10 Thermal Coal Prices to Drop Moderately but Above 2016 Average Level

     10.1  Price variation trend - declining in 1H17, stabilizing by the mid-year and picking up in 2H17

     10.2  Price forecast - down from 2016 peak but above 2016 average

     10.3  Impact by stages from industry policies - 276 workdays, suspending production for safety inspection induced by mine accidents, “Five Systems” for stabilizing prices

             10.3.1  Impact on supply-demand pattern - peak/slack season, coal stock level, global coal market situation

             10.3.2  Impact by logistics - transport cost trend