China: Daily coal output hits record high, prices may stabilize

China's National Development and Reform Commission (NDRC) has announced that the current maximum daily coal output has touched 11.93 million tonnes (mn t), a record high in recent years, as per a report in the Beijing Youth Daily, and which is available to SteelMint.

China's coal production and supply are continuing to increase, which can ensure energy security. This, in turn, is expected to allow adequate power supply for the upcoming winter heating season.

According to the official website of NDRC, with the gradual commissioning of new mines, coal production has continued to increase since October. The average daily output from 1-5 Nov'21 reached 11.66 mn t, an increase of more than 1.2 mn t compared to the end of September, while the peak daily output touched 11.93 mn t, a record high in recent years.

Contracts cover 90% of power plants

The medium and long-term contracts with the coal-fired power generating and heating enterprises have been fully signed and are being implemented. These companies signed both the fourth quarter (Q4) medium and long-term contracts.

Under both these contractual systems, the coal-producing provinces of Shanxi, Shaanxi, and Mongolia will provide a new coal source of 150 mn t to the power and heating enterprises.

As of 6 Nov'21, more than 90% of these enterprises have been covered under these medium and long-term coal contracts of which 24 provinces, regions and municipalities have touched 100%.

Coal stocks up at power plants

The supply of thermal coal has continued to increase, and replenishment of coal stocks at power plants has accelerated. Loading of thermal coal on to railways has remained at a historic high of more than 60,000 rakes. Since November, loading of thermal coal has increased by more than 35% y-o-y. Coal supply to power plants continued to exceed its consumption, and storage has also increased rapidly. Since November, the average daily coal supply has reached 7.74 mn t, and the average daily inventory has increased by 1.6 mn t. On 6 Nov'21, coal storage at power plants exceeded 117 mn t, an increase of 40 mn t over end-September's about 10,000 t.

Port stocks rise

Coal stocks at ports have steadily increased. On 7 Nov'21, stocks at Qinhuangdao Port reached 5.39 mn t, an increase of nearly 1.5 m t compared to end-September.

With the increase in China's coal production and supply and corresponding rise in coal stocks at power plants and ports, prices of thermal coal futures have fallen sharply.

Outlook

The current pricing in China is policy driven and the Government has put a price ceiling in certain regions. However, the temperature has started dropping sharply in China with the onset of winters and there is still a possibility of shortages to arise again as consumption rises. So, in all probability coal prices will stabilize in the short term as the government continues to discourage any price rise.