China coal short-term outlook December 2021

After being flat for almost three weeks, the Qinhuangdao thermal coal price dropped to below RMB800/t at the end of December. Domestic supply had grown quickly, creating massive stockpiles at gencos and ports. Meanwhile, temperatures in December were warmer year-on-year, which contained demand. We believe any demand increase due to the colder weather expected in the next couple of months will be hugely offset by a decline in demand caused by the Chinese new year holiday season, which will result in the price weakening to RMB750/t in January. The coking coal price was also stable in December, at RMB2,360/t on a Linfen low-sulphur premium FOR basis. By the last week of the year, steel mills’ margins had vastly improved, easing the pressure on cokemakers to keep coke prices low. Meanwhile, hot metal production started to increase, leading to a recovery in coal demand and price increases. We expect the coking coal price will rise to RMB2,800/t in January, considering the possible risks.