Insight
China's coal policies rescue the thermal coal market
*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
China's coal production restrictions have turned coal markets on their head this year. The Chinese government is trying to strike a balance between restoring its crippled coal sector to some measure of health while maintaining the push to reduce coal sector overcapacity without damaging downstream users such as the electricity utilities. Our analysis suggests a RMB515/tonne price strikes a reasonable balance between the coal and utility sectors and would be viewed as an acceptable price level by the Chinese government. We think this is good news for the seaborne market. We calculate this price level equates to a benchmark Newcastle thermal coal price of US$73/tonne basis 6000 nar. While well below current spot and contract prices, at this price level 98% of the seaborne market is cash positive.
Table of contents
- Overview
- Coal industry losses have been significant
- The Chinese government responded by enforcing capacity cuts
- What thermal coal price is the government comfortable with?
- Break-even analysis
- RMB515/tonne represents a reasonable balance between producers and utilities
- This price level is good news for the seaborne market
Tables and charts
This report includes the following images and tables:
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China's coal sector costs, revenues and cash flows 2011-2016Regional benchmark break-even pricesChinese domestic to international price arbitrageSeaborne export thermal coal margin curve 2016 at US$73/tonne basis 6000 nar FOB Newcastle
What's included
This report contains:
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