Hard rock picks - coal prices fall again, coal-electricity linkage in doubt
Release time:
2020-02-14
With the conclusion of annual thermal coal contract negotiations and the Lunar New Year approaching, the price of thermal coal, which had soared at the end of 2013, has once again experienced a significant collective drop. According to the coal-electricity price linkage mechanism, when the fluctuation in the price of thermal coal exceeds 5%, the on-grid electricity price should be adjusted accordingly. However, no signs of adjusting the on-grid electricity price have been shown since the beginning of the year. Power industry analysts interviewed by the Shanghai Securities News reporter indicated that it may be necessary to wait until March or April 2014 to determine whether the coal-electricity price linkage will be initiated. According to coal market analysts, the new coal sales Price of Shenhua Group, which came into effect on the 24th, is 55...
With the conclusion of annual coal contract negotiations and the approach of the Lunar New Year, the price of thermal coal, which soared at the end of 2013, has once again seen a significant drop. According to the coal-electricity price linkage mechanism, when the fluctuation in coal prices exceeds 5%, the on-grid electricity price should be adjusted accordingly. However, no signs of such adjustment have been seen so far this year.
Power industry analysts interviewed by the Shanghai Securities News reporter stated that it may be necessary to wait until March or April 2014 to determine whether the coal-electricity price linkage will be activated.
According to coal market analysts, the new round of China Shenhua Energy coal sales prices, which came into effect on the 24th, saw the price of 5500 kcal thermal coal drop by 11 yuan/ton compared to the previous week (January 13-17), reaching 591 yuan/ton. Coal varieties above 5000 kcal saw a general drop of 11 yuan. Other coal types saw a price drop ranging from 1 to 7 yuan/ton, with some types experiencing a sharp drop of 39 yuan/ton due to slowing downstream demand.
As a benchmark in the coal industry, China Shenhua Energy's further reduction in coal prices is bound to trigger a wave of price cuts within the industry. The reporter learned that another major coal enterprise, China Coal Group, has also lowered its spot price at northern ports to 591 yuan/ton for 5500 kcal coal, in line with Shenhua's new adjusted Price. Datong Coal, the third largest in China, currently also has its 5500 kcal thermal coal Price around 590 yuan/ton. The reporter understands that the trading Price of 5500 kcal coal at northern ports has fallen to as low as 570 yuan/ton.
Coal industry analysts generally believe that in the short term, due to seasonal factors, the daily consumption of downstream power plants has decreased, and coal trading has become quieter, leading to a rapid decline in coal Prices. From a medium-to-long-term perspective, the coal Price in the first half of 2014 lacks supporting factors and will remain low. The average Price is unlikely to exceed last year's level.
The significant drop in coal Prices in 2013 led to a significant increase in the profitability of thermal power plants. In 2013, the total profit of the five major power generation groups alone reached 74.034 billion yuan, a record high. The market began speculating in the third quarter of 2013 on whether the coal-electricity linkage mechanism would be activated to lower the on-grid electricity Price. However, starting from the end of September 2013, thermal coal Prices continued to rebound. The last index of the Huanbohai thermal coal Price in 2013 closed at 631 yuan/ton, only 2 yuan/ton different from the first index of 2013, which did not meet the conditions for the activation of the coal-electricity Price linkage.
“Affected by overcapacity, the impact of imported coal, and environmental pressures, coal Prices will continue to be suppressed in 2014,” Yue Qiyao, Senior Analyst of Utilities, Asia-Pacific at Bloomberg New Energy Finance, told the reporter. Although the coal-electricity Price linkage is on an annual cycle, the lack of adjustment signs at the beginning of the year does not mean that it will not change during the year. He believes that a judgment can only be made in March or April this year.
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