Coal enterprises generally "fear high" like walking on thin ice and worry about the "coolness" of coal prices

In Xi'an, Shaanxi, Xie Xu, the chief researcher of Western Futures, has been particularly busy recently.
Many coal companies have approached her, hoping to seek help in coal hedging.

"This year, the number of coal companies that consulted and intends to participate in hedging business has increased significantly compared to previous years.

" Xie Xu told a reporter from China Securities News, "Recently, several coal companies have consulted us on how to use the futures market to lock in current high profits.

The distress of coal traders 

Northern Shaanxi has abundant coal resources.

Xie Xu, who has been engaged in the research of black futures for 6 years, contacts large local coal companies to conduct field investigations and obtain first-hand market information whenever there is a key market situation.
 

Since the fourth quarter of last year, the violent fluctuations in coal prices have attracted her attention-port coal prices began to rise from 600 yuan/ton, and once exceeded 1,000 yuan/ton in mid-January this year; at the end of February, they fell sharply to around 560 yuan/ton; Subsequently, it continued to rise.

As of early May, coal prices had rebounded to 880 yuan/ton.

"Since the fourth quarter of last year, my country's coal prices have continued to be high, and they have remained in the red warning zone designated by the National Development and Reform Commission for a long time.

More importantly, the fluctuation range and frequency of coal prices have become significantly larger and faster.

　　The reporter's survey found that in this round of price fluctuations, traders' business activities have been strongly impacted.

 

　　A market participant said that it is difficult to make money amidst large price fluctuations.

For example, if coal prices continue to break through new highs, traders will be afraid of highs and dare not hoard large quantities of goods.

　　"In the rapid rise and fall of the market, traders often find it difficult to make money.

" Xie Xu said that upstream traders are making money, and midstream traders and downstream power plants are suffering.

　　"For coal mining companies, because mining costs are relatively fixed and profits are completely dependent on prices, they have naturally made a lot of money in the past two years.

Downstream power plants are the most tormented industry in the industry chain.

　　The supply and demand gap persists 

　　The latest round of coal prices rose rapidly.

According to data from Wenhua Finance and Economics, since March, the main coking coal futures contract has risen from 1452 yuan/ton to 2138 yuan/ton, an increase of 47.
2%; the main thermal coal futures contract has risen from 610 yuan/ton to 944.

　　Zhang Haiduan, a thermal coal researcher at Yide Futures, said: “As the fundamentals of supply and demand continue to be tight, the current price of thermal coal futures has risen to an absolute high in history.
The recent high sentiment has cooled.
” 

　　Tension on the supply side continues.
In the first quarter of this year, my country’s coal output was 971 million tons, a year-on-year increase of 16%; a month-on-month decrease of 8.
1% compared to the fourth quarter of last year.
The latest data from the General Administration of Customs shows that from January to April, my country's coal imports amounted to 90.
126 million tons, a year-on-year decrease of 28.
8%.
On the demand side, the total electricity consumption of the whole society in the first quarter was 1921.
9 billion kWh, a year-on-year increase of 21.
2%; the cumulative power generation was 1905.
1 billion kWh, a year-on-year increase of 19%, of which thermal power generation was 1.
4379 billion kWh, an increase of 21.
1%.
It accounts for 75.
48% of the total power generation, which is significantly higher than the same period last year.
 

　　"Industrial electricity consumption has increased significantly this year, and the proportion of thermal power in the total power generation has increased significantly, driving the rapid growth of national coal demand.
" 

　　Xie Xu said that the current mismatch of thermal coal supply and demand continues, port inventory is still low, and the power plant’s peak summer replenishment cycle has arrived.
The main production area may not be as fast as expected to ensure supply and increase production.
Imported coal is an important factor in regulating coal prices.
Elastic factors are also difficult to play a role, coal supply and demand are still tight, and the gap still exists.
 

　　Coal enterprises are walking on thin ice 

　　Zhang Haiduan said that looking ahead to coal prices, the current contradiction between supply and demand has not been effectively resolved.
The peak summer is coming.
If the supply guarantee is limited and the market sentiment cools in the short-term, coal prices may have a correction, but the magnitude may be relatively limited, and the fundamentals are still strong.
 

　　"Recently, many parties have expressed that coal prices are too high and unsustainable, and the control of coal prices is inevitable.
The effect of increasing production and supply will gradually appear, and the high fluctuations of coal prices will intensify.
" Xie Xu predicts.
 

　　In this context, coal companies are walking on thin ice.
 

　　Zhang Haiduan said that under the high coal price environment, companies can be said to be profitable.
The current coal price is already at an absolute high level and there is a short-term risk of correction.
Traders should reduce speculation in hoarding.
 

　　"Coal companies are generally afraid of high coal prices.
" Xie Xu said that at present, most companies believe that coal prices are over-rising and unsustainable, and there is a risk of falling at any time.
In order to lock in high profits, they use the futures market to avoid price fluctuations.
The risk is very necessary.
 

　　"When many companies first come into contact with futures, they always hope to use the futures market to make big and quick money.
This is the result of companies' inadequate understanding of futures and its functions.
After many communications and exchanges with companies, we help companies actually participate in futures.
After that, corporate concepts will gradually change and will realize the importance of futures tools.
" She said.

　　Transfer from: China Securities Journal

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