On the 6th Steel Development Strategy & Supply-Demand Forum, Mr. Hua Zugui, Managing Director of China Coal & Coke Holdings Limited delivered a speech named China Coal Market Supply in 2010. Hua said that metallurgical coal resources will keep tight in China , the price will decline in Q2 and will perch relatively high level in the whole year 2010.
Coal Resources Regrouping to Have Slim Effect on Coal Output
Henan and Inner Mongolia provinces will join the wave of mergers and regrouping of small coalmines in 2010. The market is worried that the move may severely affect domestic coal production. But Mr. Hua said that small coalmines' output is only a small proportion of national turnout, in other word, their resources regrouping will have slim effect on whole production. He predicted that China raw coal output will keep rapid growth this year and hit 3.35 billion tonnes.
The trend of thermal coal and coking coal output will perform different in 2010, he highlighted. As the large coal producers (such as Shenhua , China Coal, Huaneng, Guodian etc) will start the new large mines in Inner Mongolia , thermal coal production will grow up quickly. While Shanxi province, key coking coal producing base, is busy conforming the coal resources, domestic coking coal operation will perform stagnant.
China Net Coal Imports to Re-happen in 2010
China , with the leading economic recovery versus other nations and high domestic coal price, imported a total 125.8 million tonnes coal in 2009, up 2.1 fold upon 2008. Among total inbound shipments, coking coal was 34.4926 million tonnes, that is 4 fold of 2008' s arrivals. In the first quarter, China posted 10.8811 million tonnes of coking coal imports, up 215.9 percent year on year.
In 2009' s coal import, thermal coal share has no obvious change, coking coal share climbed up, while anthracite share declined. For instance, coking coal share was 12.19 percent in 2006, versus 27.41 percent in 2009; anthracite share was 59.14 percent in 2006, versus 27.28 percent in 2009.
As Mr.Hua introduced, coking coal resources in Hebei province (such as Hebei Fengfeng Group) is inclined to dry up, and high quality coking coal resources in Inner Mongolia , Shandong etc. also shrink. Metallurgical coal resources are mainly 1/3 coking coal and gas coal. In spite of small coalmines' capacity released completely in Shanxi province, China will continue facing up with coking coal supply tension. Therefore, China 's reliance over seaborne metallurgical coal (esp. prime coking coal and rich coal) will remain strong in long term.
Coal Price: To Fall in Q2, To Rally in Q3 &Q4
Mr.Hua introduced that coking coal price covers around 90-92 percent of coke manufacturing cost. In term of future coal price, Hua anticipated that coal price will soften slightly in Q2, rally steadily in Q3 &Q4; price level will keep high in the whole year.
Hua disclosed following pointviews:
1) Coal price hike will be the keynote in the future;
2) Chinese government increases fixed assets investment, makes monetary policy more flexible. The governments has raised the deposit reservation ratio so as to narrow cash flow;
3) The government will work hard to control real estate industry and restrict the over-rapid increase of house price;
4) Coal resource mergers will help enhance coal industry concentration, coalminers' pricing power will be also strengthened;
5) Key coking coal producing base Shanxi province will continue being busy reorganizing coal resources this year, and capacity will not be unleashed completely.
In the following quarter, part coalmines will resume working, coke enterprises and steel mills will work together to reduce coal purchasing cost, thus, metallurgical coal price will decline gradually. In the later two quarters, coke and steel prices will stabilize, and the enterprises will replenish coal stockpiles, which as a result jack up coal price. In long term, metallurgical coal price will perch at high level.
(source: steelhome.com)