Overview of Chinese coal market

Monday, 17 May 2010 13:44:14 (GMT+2)

Against the background of the gradual overall recovery of the Chinese economy, China's coal market is expected to be characterized by equilibrium between the supply and demand sides in the rest of the second quarter, especially because many power plants have restocked their coal inventories in advance. Driven by improving demand, recently coal prices have been following a stable trend on the whole.

For the coming period, the following factors are expected to affect China's coal market:

a.       Monetary policy and industrial recovery
With a loose monetary policy still generally remaining in place, China's domestic economy will continue to maintain its strength. In the meantime, the main domestic coal consuming industries such as steel, electric power, chemicals and construction steel have gradually rebounded from the bottom, posting increasing demand for coal. Since the beginning of March, some high energy consumption sectors have entered into their busy season, which will fuel coal demand further.

b.      Coal mine accidents
In the recent period, many coal mine accidents have occurred in China. In this context, a new round of nationwide inspections of coal mines in China started in April. These inspections, which will continue for two months, are mainly focusing on safety issues. The coal supply in some districts will thus be negatively affected.

c.       Bad weather conditions
At present, the southwestern regions in China are suffering from severe drought, largely reducing the power generating capacity of hydroelectricity power stations. For this reason, some districts are indicating strong demand for coal as they seek to maintain their electricity power supplies.

d.      Overhaul of the Datong-Qinhuangdao railway line
The overhaul of the Datong-Qinhuangdao railway line has hindered coal transportation to some extent. In April this year, coal transportation on the line in question was down 12 percent compared with April 2009.

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