Insight
China rail expansion adds woe to weakening coal prices
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
What’s inside this report?
Coal prices in China are forecast to fall in the near term because supply is growing faster than demand. But the country’s recent railway capacity expansion is also exacerbating the situation.
We unpack the impact of China’s rail expansion plans on coal prices – from the benchmark Qinhuangdao price to seaborne imports.
What key questions does this report answer?
- How China’s plans to expand capacity on three key rail lines will affect coal supply and pricing – including the benchmark Qinhuangdao coal price
- What China’s rail expansion plans could mean for coal imports
- How transport costs for coal compare by route
- Why we think seaborne thermal coal may face heavier price pressure
Report summary
China has been expanding its railway capacity as part of a three-year plan introduced in 2018. Rail transportation will increase by 1.1 billion tonnes in 2020 compared with 2017. Coal rail transportation, which accounts for nearly 60% of total rail transportation, is scheduled to increase by 650 Mt. The Mengji, Shuohuang and Menghua lines are among the key routes increasing capacity. But this growth in rail capacity will have a negative impact on the benchmark Qinhuangdao coal price, which will also face pressure from increasing supply. Although we don’t think the rail expansion target will be fully met, the additional capacity will push the Qinhuangdao price down into the government’s desired range of RMB500/t to RMB570/t in 2020. We also believe the seaborne low rank coal market will be impacted too. Read this Insight for details on how capacity expansion on the three key lines will have an impact and what it could mean for imports.
Table of contents
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Executive summary
- Mengji and Shuohuang lines increase supply to the Bohai Rim
- but Bohai Rim demand is declining
- Menghua line will divert demand in Hubei, Hunan and Jiangxi from the Bohai Rim
- Coastal demand is falling as provinces restrict coal use
- Increasing supply capacity and falling demand pressure Qinhuangdao price
- Stagnant domestic market will restrict thermal coal imports in 2020
- Risk and uncertainty
Tables and charts
This report includes the following images and tables:
- Coal transported by China’s top five coal-dedicated rail lines, 2018-2020
- Routes from Ordos to Yueyang
- Transport costs by route, RMB/t
What's included
This report contains:
