China coal 10-year investment horizon outlook

Wood Mackenzie estimates China’s benchmark QHD price to increase to RMB1,300/t in 2022, which is 27% higher than in 2021. In addition to the global energy crisis, which cut seaborne coal exported to China, low additional domestic supply is the key factor for the market tightness. We expect both supply and demand to increase in the next couple of years and the market will remain tight. Furthermore, the market will gradually reverse to oversupply in the mid-term and China’s coal industry will need the government’s help again to rationalise supply. For met coal, with the falling steel production, the lower BF-BOF route output will bring down met coal demand further, making it difficult for the current high price to persist. We also believe that the domestic coking coal reserve will decrease faster than demand, which will result in a smooth demand for imported sources and support the price at RMB1,500/t CFR Tangshan for domestic coal. For more details, please read our report.