China coal short-term outlook May 2022 Report

Commodity Market Report 03 June 2022

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Report summary

The QHD price fluctuated around RMB1,200/t in May. Weak demand and the government’s attitude towards stabilising coal price pressured the spot market. However, the low inventory and coming summer peak demand season prevented the price from falling. We expect the fundamentals to result in the QHD rising in June. The grim steel demand picture in early May exhausted the patience of the steelmakers who had suffered slim margins for months. The strong pressure pushed the prices of coke and coking coal down by RMB600-800/t. We expect the situation to ease in June, as the pandemic measures have led to positive results and Shanghai is expected to reopen.

Key events
Shanghai’s lockdown dampened China’s thermal coal demand
Concerns about falling demand partly offset by improving Covid-19 conditions in late May
Domestic: policy to ensure supply resulted in high production records
Domestic: Ordos plans to increase mine output
Import: landborne imports from Mongolia to increase rapidly in June
Declining domestic output underpinned the QHD price
Price weakness to recover when a substantial demand increase is in place