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China 2015 thermal coal market outlook dim

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Publish time: 26th December, 2014      Source: www.cnchemicals.com
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China’s thermal coal market is most likely to stay weak next year, with no clear signs of improvement, sources learned from the coal trade fair 2015 held in Taiyuan, capital of coal-rich Shanxi province, over December 22-26."Though oversupply is expected to ease to some extent, the overall situation may not improve much next year, given the uncertainties in global economy and weak domestic economy, said Qu Jianwu, director of the China Taiyuan Coal Transaction Center (CTCTC).He said 2014 is the toughest year for China’s coal industry, which isstill suffering high inventories and low demand; overcapacity would be hard to digest in the short term.Miners and utilities attending the five-day fair, an annual gathering for next year’s contracts, were generally bearish towards the thermal coal market outlook, foreseeing no visible improvements in the coming year.They also considered oversupply the most vital reason for the gloomy outlook that concurs with an expected further slowdown in the Chinese economy.In 2015, new capacities will continue to increase at a pace faster than elimination of the backward mines, adding new pressure to the overall supply in the domestic thermal coal market, said one official with a Shanxi-based miner."Competitions among miners are very fierce, and I’m afraid prices will fall down before the Lunar New Year on February 19," the official said.The CTCTC data shows that 851 million tonnes of coal output are estimated to be available in Shanxi in 2015, up 7.2% year on year,11.3% of which or 96.46 million tonnes will supplylocal utilities. Demand from major local utilities is likely to rise 14.5% year on year to 93.08 million tonnes next year,showed a survey result from Shanxi Economic and Information Commission.Affected by weak demand and low prices, nearly 30% miners in main producing areas of Shanxi are suffering deficits, said officials with the CTCTC.The China coal Transportation and Distribution Association data showed that there are eight provinces suffered industry-wide deficit, and 70% of miners are in losses. 30% of mining companies failed to pay wages in time and many mine owners cut workers’ salaries by over 30%.Coal stocks at power plants under six coastal utilities were above the safety level of 15 days of consumption for most of time in 2014, and may continue to stay high next year.The latest data showed these coastal plants had 13.80 million tonnes of coal stockpiles on December 24, surging 20% from the start of the year, which was enough to last 20 days of burn.Insiders said though government’s adjustment of import and export policies sounds cheering for domestic miners, challenges from overseas suppliers will still be huge. While domestic thermal coal prices have improved over the past two months,the prices of imported coal have been on the downward trajectory.On December 24, the Fenwei/Platts CCI1 Index for domestic 5,500 Kcal/kg NAR coal traded at Qinhuangdao port was assessed at 509.00 yuan/t with VAT, FOB basis, up 34 yuan/t from the start of October. While, the CCI8 index for imported 5,500 Kcal/kg NAR coal was 370 yuan/t or $60.30/t, CFR south China ports, down 34 yuan/t.The promotion of clean energy sources is also squeezing the market of coal miners. One state-owned utility source said total power output increased in 2014, but coal-fired output decreased due to an obvious growth in new energies like hydropower and wind power.