As coal spot prices plummet to a five-year low, HSBC has issued a further warning: this may not be the bottom, with prices at risk of falling below 600 yuan per ton in the coming months. Historically high production levels and persistently elevated port inventories remain the primary obstacles to a price rebound.
According to Baidu News, HSBC’s latest research report indicates that China’s coal spot prices continue to decline. The price of 5,500 kcal thermal coal at Qinhuangdao has dropped to approximately 610 yuan per ton, marking the lowest level in nearly five years. Although seasonal consumption recovery and pre-summer restocking by buyers have raised expectations of price stabilization or a rebound, HSBC believes seasonal restocking is unlikely to drive a substantial recovery. The bank maintains that coal prices remain at risk of falling below 600 yuan per ton in the coming months. Record-high domestic production and stubbornly high port inventories are the key factors suppressing price rebounds. Currently, coal prices are down 30% year-on-year, a decline far exceeding earlier market expectations. Demand is not the primary driver of the price drop. The report shows that since March this year, daily coal consumption at major power plants has rebounded to levels comparable to the same period last year or the three-year average. Data from May 26 indicates daily coal consumption reached 772.9 thousand tons, up 2.2% year-on-year. Therefore, HSBC does not attribute this year’s coal price decline primarily to demand factors. Analysts note that with the peak season for residential electricity demand and hydropower output approaching, China’s coal demand is expected to remain similar to last year’s levels. Supply pressures and high inventories are the real drag on coal prices. Domestic coal production has repeatedly hit record highs this year. From January to April, output rose 6.6% year-on-year to a historic peak, driven by production resumption in Shanxi and capacity expansion in Xinjiang. Although output declined 12% month-on-month last month, supply growth is expected to continue outpacing demand for the remainder of the year as producers maximize profits. Port inventories are another focal point for the market. Despite seasonal restocking reducing stockpiles, inventories remain 21% higher than last year, posing a significant hurdle to price recovery. ~~~~~~~~~~~~~~~~~~~~~~~~ The above content is sourced from Baidu. For more detailed analysis, including real-time insights and frontline research, consider subscribing to [Baidu Annual Membership], a joint initiative by Baidu and Wisdomburg. Risk Disclosure and Disclaimer: Markets involve risks; invest with caution. This article does not constitute personal investment advice nor does it consider individual users’ specific investment objectives, financial situations, or needs.Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment decisions based on this information are made at their own risk.