After the previous slump, as the macro outlook warms, coal supply is weakly balanced at the bottom, downstream steel bottoms out and rebounds, and the coke market is expected to usher in a new round of gains.
First, the coal supply is weakly balanced at the bottom. After the second half of 2011, as demand weakened, the surplus capacity generated after the last round of easing quickly put pressure on the market. Domestic coal inventories, represented by Qinhuangdao inventories, have increased rapidly, and coal piles have even spontaneously combusted during this period. The pressure of destocking makes traders afraid to stock up in large quantities. In the past, the water storage capacity of the stock tank of traders was greatly reduced, which also directly led to an increase in apparent stock. In the first three quarters of this year, the growth rates of coal production, transportation and consumption declined, inventories rose and prices fell. The continued decline in prices has led to increased losses faced by coal companies.
From the point of view of actual output, after experiencing persistently low prices, coal companies have significantly reduced production. In August, the national raw coal output totaled 322 million tons, down 0.19 tons from July. In September, the national raw coal output was 319 million tons, a year-on-year decrease of 3.5% and a month-on-month decrease of 0.93%. The national coal output declined for three consecutive months. At the same time, due to the requirement of the State Administration of Work Safety to further promote the special action of "fighting non-coal mines" and extending the time to the end of 2012, the rectification and closure of coal mines and non-coal mines have been increased. With the reduction of coal production and the suspension of production, Qinhuangdao's inventory has dropped significantly. The reduction in supply also makes it difficult for coke to fall in the short term.
Second, 80% of coke demand comes from steelmaking demand. The rise and fall of the steel industry directly affects the price trend of coke. Since the fourth quarter of 2011, the European debt crisis, domestic policies continued to suppress the real estate market, overcapacity of steel and the tight capital chain of steel traders, etc., the steel market has been stagnant. The price of rebar, one of the steel price indicators, has been falling all the way, which also dragged down the price of coke to freezing point. However, steel industry expectations are improving as railway infrastructure investment picks up. In consideration of steady growth, the Ministry of Railways tentatively set the national railway capital construction investment plan at 530 billion yuan in 2013, slightly higher than the 516 billion yuan planned at the beginning of 2012. The substantial recovery in railway infrastructure investment will effectively boost the demand for steel. There are also signs of further warming in real estate. In the first 10 months of 2012, the area of ​​housing sales was 787 million square meters, a year-on-year decrease of 1.1%; the growth rate of the monthly housing sales area continued to pick up. In October, the sales area was 103 million square meters, a year-on-year increase of 23.16%. With the further advancement of urbanization, the rural population moving into cities will promote the improvement of the housing market.