China coal long-term outlook H1 2019: supply-side reform will help stabilise benchmark thermal price

China has been trying to contain thermal coal prices in the range it deems reasonable since early 2017. However, the price has been above this range for most of the time. China has tried to cut thermal coal imports but tight domestic supply has made this difficult. We don’t expect this situation will last. We believe the price for the benchmark Qinhuangdao 5,500 thermal coal will settle in the desired range soon and remain there in the long term. And thermal coal imports will also be capped, mainly caused by increasing domestic supply. On the metallurgical coal side, demand for coking coal has been strong in the past few years. This has supported prices, allowing Liulin #4 CFR Tangshan to peak at RMB1,894/t in 2019. However, we expect prices will fall to around the RMB1,500/t level in the long term in line with declining steel demand. For more details, please read our long-term outlook.