The Price Of Thermal Coal Is Expected To Reach A New High

    Recently, the thermal coal market has shown a relatively strong performance, with prices continuing to rise significantly. During the seasonal off-peak period for power coal consumption, the price of thermal coal unexpectedly increased, and the main reasons for this are as follows:

 First, the daily coal consumption is significantly higher than the same period last year. Since October, the southern regions have experienced a noticeable "autumn heatwave" with temperatures remaining persistently high, while the northern regions have seen a significant drop in temperatures, with some areas already starting to heat up their homes. Overall, this unique weather pattern of "hot south, cold north" has caused the overall daily coal consumption to not decrease significantly like in previous years, and it is noticeably higher compared to the same period last year. In fact, some power plants have seen their inventory decrease during the traditional off-season storage period. In addition, the frequent rainy weather has affected photovoltaic power generation, which is also one of the reasons why thermal power generation operates at a higher load during the off-season.

 Secondly, the increase in supply from the production areas has been relatively slow. Since October, the main coal-producing areas of Shanxi, Shaanxi, and Inner Mongolia have continued to be affected by rainy weather, significantly impacting the production and sales of coal mines, especially open-pit mines. Coupled with the ongoing impact of safety inspections, environmental regulations, and over-capacity checks, supply from the production areas has increased slowly. However, with the continuous rise in winter storage demand and trade demand in the distribution chain, the shipping pace of coal mines has remained strong, and pit-mouth inventory has continued to decline, supporting a general increase in coal prices. Many coal prices have risen by more than 50 yuan/ton in the short term.

 Thirdly, the inventory at Beigang is lower than the same period last year.

 Fourth, market expectations are relatively optimistic. The market generally believes that coal production in the fourth quarter is unlikely to see a significant increase, while as temperatures gradually drop later in the season, the rigid support from peak season demand will strengthen. Therefore, most market participants believe that the possibility of upward fluctuations in the thermal coal market in the fourth quarter is relatively high.

 Looking ahead, most terminal coal inventories are currently at sufficient levels, so as prices continue to rise and the cost-effectiveness advantage of imported coal expands, it is expected that activity in the domestic trade market will decrease. However, with recent significant drops in temperatures across the country, with many regions below last year's levels, market expectations for a cold winter have increased. It is expected that daily consumption will likely remain higher than last year, so the price of thermal coal is likely to gradually reach new highs this year driven by demand.