Winter Coal Supply Stable; Power Firms Adjust for New Trends
Recently, the domestic coal market has once again stirred up waves, with coal prices first rising significantly and then slightly falling back. Does this mean that the current round of coal restocking market has come to an end? How will the power industry, which is closely related to coal consumption, deal with the fluctuation of coal prices?
Industry experts said that the foundation for ensuring supply this winter is relatively stable. Power generation companies seize the opportunity of relatively relaxed coal supply and reduced costs to accelerate the optimization of layout and structural adjustment, further enhancing the ability to ensure supply and their own competitiveness.
This winter, the domestic coal market may maintain a relaxed supply.
Before the National Day holiday, the coal price rise trend reappeared. The weekly increase in the price of 5500 kcal/kg and 5000 kcal/kg thermal coal at northern ports exceeded 16 yuan/ton. On October 8, the index released by the China Electricity Council (hereinafter referred to as "CEC") showed that the price of 5500 kcal/kg thermal coal was 871 yuan/ton, and the price of 5000 kcal/kg thermal coal was 770 yuan/ton, a slight callback of 1 to 2 yuan compared to before the holiday.
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CEC experts analyzed that recently, from the transit port to the production area, influenced by the rising demand for restocking, the structural shortage of sellable high-quality coal has not been alleviated, and the inventory of some northern ports continued to decline, with traders' willingness to support prices being strong. In most areas of the south, high temperatures continue, and the power generation of hydropower continues to decline. The daily consumption of coastal power plants showed a certain resilience at the end of the peak period, and the inventory of power plants and upstream and downstream ports both decreased significantly, causing the central price of coal spot market prices to continue to rise before the National Day holiday.
Another person in charge of coal sales in the production area revealed that before major festivals, the intensity of safety production inspections in the production area will increase. At the same time, there is a possibility of some mining areas with safety hazards being shut down, and there are also some coal mines undergoing equipment maintenance and relocation. The market's expectation of reduced output has increased, driving up coal prices.
Looking at a longer period, the subsequent coal supply from the main production areas, including Shanxi, will rise steadily, and the supply and demand pattern will determine that subsequent coal prices will return to stability.
"The supply and demand pattern of the domestic thermal coal market is generally relaxed, and the supply of thermal coal is guaranteed. The price of thermal coal may mainly operate in a range of fluctuations, maintaining an overall stable situation, which is conducive to ensuring supply and controlling prices. However, the possibility of market price increases during the peak winter season for power supply and heating cannot be ruled out." A person in charge of Datang Power recently said when judging the business situation.
The person in charge of Inner Mongolia Huadian introduced that in the first half of 2024, the output of raw coal above designated size in Inner Mongolia was 634 million tons, ranking first in the country. Against the backdrop of a year-on-year decline in the national raw coal output in the first half of the year, the raw coal output in Inner Mongolia increased by 3.8% year-on-year, and the long-term agreement price of coal has been stable and declining in recent years, providing profit space for the company's performance growth. The company insists on the "long-term agreement + self-production + market" procurement model, closely follows the changes in the coal market, strengthens inventory management, and plays the role of low storage and high consumption, taking multiple measures to control the cost of coal procurement.
Power generation companies adjust the structure to cope with the new situation.Coal supply is becoming more relaxed, laying the foundation for the downstream power generation industry to ensure electricity supply. However, the work of ensuring electricity supply also involves more factors.
The "China Power Industry Annual Development Report 2024" predicts that the national total electricity consumption growth rate in 2024 will be close to that of 2023. However, due to the uncertainty of new energy power generation output and water inflow, the increase in conventional power sources is less than the increase in electricity load, which increases the potential risk of power production and supply. It is expected that the national power supply and demand situation in 2024 will show an overall tight balance; during the peak summer and winter electricity consumption periods, the power supply of some provincial power grids in some regions will be tight, and demand-side management measures may need to be implemented at some times.
At the recent collective roadshow event for the power industry held by the Shanghai Stock Exchange, many power company executives all stated that for a considerable period in the future, thermal power will still play a "ballast stone" role. Many companies are increasing investment in high-parameter, large-capacity unit construction. With the gradual commissioning of these new units, power installation capacity, electricity generation and other production indicators are expected to show a steady growth trend, which will better ensure electricity supply.
In the first half of the year, the performance of Jiangsu Guoxin Energy sector increased significantly, mainly due to the company seizing development opportunities, adding electricity generation by building million-kilowatt coal-fired units, and strengthening cost and fee control at the same time. Jiangsu Guoxin Board Secretary Gu Zhonglin said that under the construction of a unified national power market system, thermal power companies will face a broader market space, which is conducive to increasing electricity sales. However, at the same time, thermal power companies need to increase market sensitivity, flexibly adjust power generation strategies and pricing mechanisms, to adapt to market competition.
Shanghai Electric Deputy General Manager, Chief Accountant, and Board Secretary Chen Wenhao said that the company is actively promoting the construction of high-quality thermal power unit projects such as the Caojing Phase II project and the Jiangsu Binhai thermal power expansion project. Recently, the Caojing Phase II project completed the first tank concrete pouring of the main plant, and the project has entered the comprehensive construction stage. In the second half of this year, the company will also accelerate the construction of million-kilowatt unit projects to ensure safety, quality, and efficiency, and each project will complete the node targets on schedule.
As of the end of August, China's new energy power generation installation scale (including wind power, solar power, and biomass power) is 1.27 billion kilowatts, accounting for more than 40% of the total power generation installation, reaching 40.7%. China Electricity Council Executive Vice Chairman Yang Kun said: "In August, China's non-fossil energy power generation accounted for 40% of the total electricity consumption of the whole society of the month, an increase of 53.4 billion kilowatt-hours year-on-year, accounting for two-thirds of the total electricity consumption increase of the whole society of the month. With the green transformation of the power source structure, more and more electricity consumption needs will be provided by non-fossil energy power generation."
Based on the instability of new energy power generation, power companies are also paying more and more attention to the peak regulation function of thermal power units, actively promoting innovative formats such as virtual power plants and coal-fired unit coupling molten salt thermal storage demonstration projects, while playing a role in ensuring power supply, they also further enhance their own competitiveness.
Tianfeng Securities believes that under the main line of ensuring power supply and strengthening the consumption of new energy, the construction of related infrastructure will be actively promoted, and mainstream power equipment companies and power engineering construction companies are expected to continue to maintain prosperity.
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