Insight
China's coal policies rescue the thermal coal market
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 4 images and tables including:
- China's coal sector costs, revenues and cash flows 2011-2016
- Regional benchmark break-even prices
- Chinese domestic to international price arbitrage
- Seaborne export thermal coal margin curve 2016 at US$73/tonne basis 6000 nar FOB Newcastle
What's included
This report contains:
Other reports you may be interested in
06 January 2023
China was to boost coal output and leverage prices – how much was achieved?
Insight
China was to boost coal output and leverage prices – how much was achieved?
Demand issues affecting prices, much less so for supply
$1,10018 November 2022
Global thermal coal 10-year investment horizon outlook
Commodity Market Report
Global thermal coal 10-year investment horizon outlook
All manner of factors collided together this year to drive global thermal coal prices beyond anything we have seen before in history.
$6,75016 December 2022
Global thermal coal: 2022 in review
Insight
Global thermal coal: 2022 in review
A recap of the major events impacting thermal coal markets this year.
$1,100