China coal short-term outlook January 2018: cold snaps send prices higher Report

Commodity Market Report 02 February 2018

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Report summary

In January, thermal and metallurgical coal prices jumped 8% and 10% month-on-month, respectively. The largest driver of the price increases was strengthening demand. But the Chinese New Year holiday slowdown will start to play a role in February. We expect the downtime will have a greater impact on demand than supply. That said, we won't see any further increase in domestic prices in February.

Executive summary
- Key market data
Prices
- Thermal coal prices overheated on higher demand amid snowstorms
- Strong holiday restocking supported robust metallurgical coal prices
  - Key thermal coal prices – history and forecast, US$/t nominal
  - Hard coking coal price arbitrage at Tangshan steel mill, US$/t nominal
Demand
- Cold weather will lift coal generation to a record high in January
- Metallurgical coal demand strengthened due to restocking for the Chinese New Year
Supply
- Higher-than-usual domestic coal supply expected during the holiday
- Potential relaxation on seaborne coal imports