China coal prices rebound week on week; April output seasonally declines but summer demand remains supportive

Overview

This report focuses on weekly changes in China's coal market. Its main conclusion is that coal prices continued to recover domestically, with most thermal coal and coking coal prices rising week on week. Coal output in April fell sharply month on month, but the report explains this as a seasonal factor after the end of the heating season rather than a structural supply contraction. The report remains constructive on summer demand, expecting cooling demand to lift thermal power generation and, amid low inventories, support thermal coal prices.

Core views

The report's core views are: first, domestic thermal coal prices continued to recover, with QHD 5500, CCI 5500, and the Shanxi Datong mine-mouth price all rising week on week; second, domestic coking coal prices mostly moved higher, with Liulin No. 4 mine-mouth prices and FOR prices increasing, while overseas prices such as NEWC and QLD weakened; third, April coal output fell 1% year on year and 12.5% month on month to 386 million tonnes, mainly due to seasonality, and year-to-date output was still up 1.2% year on year; fourth, despite pressure from renewable substitution, summer cooling electricity demand and relatively low power plant inventories could continue to support thermal coal prices.

Analysis framework

The report combines weekly price tracking, monthly output comparisons, and inventory and seasonal-demand judgments to compare week-on-week changes in domestic and overseas thermal coal and coking coal prices, and uses monthly coal output, year-on-year and month-on-month indicators, and power plant inventory levels to explain marginal shifts in supply and demand.

Methodology notes

• Commodity supply and demand trackingWeek-on-week price monitoring

  Track short-term coal market momentum through price indicators such as QHD 5500, CCI 5500, mine-mouth prices, FOR, NEWC, and QLD.

  Week-on-week price gains indicate a near-term improvement in domestic coal prices, but the pullback in overseas prices suggests external markets are not strengthening in lockstep.

• Output cycle analysisYear-on-year vs month-on-month output split

  Interpret April coal output separately from its year-on-year, month-on-month, and year-to-date performance.

  The sharp month-on-month drop in April output is attributed to the seasonal retreat after the winter heating season, while year-to-date growth of 1.2% shows supply has not broadly weakened.

• Demand seasonality assessmentSummer power demand framework

  Assess thermal coal price support through summer cooling demand and thermal power generation demand.

  The report believes that even with pressure from renewable-energy substitution, summer heat-driven cooling demand may still lift thermal power generation and thus support thermal coal demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Thermal coal

  One of the report's core tracked assets

  Strengths

  Domestic prices mostly rose, and summer cooling demand plus low power plant inventories provide support.

  Weaknesses

  Pressure from renewable substitution remains, and output and demand are clearly seasonal.

  Comparison

  Domestic thermal coal indicators outperformed some seaborne coal prices, with NEWC falling week on week.

  Risks

  If summer weather is mild, thermal power demand is weaker than expected, or inventories recover, price support could fade.

• Coking coal

  One of the report's core tracked assets

  Strengths

  The Liulin No. 4 mine-mouth price and FOR price rose week on week, signaling improved domestic pricing.

  Weaknesses

  Some overseas coking coal prices such as QLD fell slightly, and external price momentum was weaker.

  Comparison

  Domestic coking coal prices outperformed overseas indicators such as QLD.

  Risks

  Weaker steel demand or further declines in overseas prices could weigh on coking coal prices.

• China Shenhua Energy

  Covered company mentioned in the disclosure

  Strengths

  As a coal-related company, it may be affected by changes in domestic thermal coal prices and demand.

  Weaknesses

  The report text does not provide company-level operating, valuation, or earnings analysis.

  Comparison

  The report does not give a direct operating comparison with other companies.

  Risks

  The disclosure states that Morgan Stanley holds 1% or more of its class A ordinary shares and that its Hong Kong securities are subject to liquidity provision/market making, so investors should note the conflict-of-interest disclosure.

• Yankuang Energy Group Co Ltd

  Covered company mentioned in the disclosure

  Strengths

  As a coal-related company, it may be affected by domestic coal price changes.

  Weaknesses

  The report text does not provide company-level operating, valuation, or earnings analysis.

  Comparison

  The report does not give a direct operating comparison with other companies.

  Risks

  The disclosure states that Morgan Stanley holds 1% or more of its class A ordinary shares and has or expects to have investment-banking and securities-related service relationships with it, so investors should note the conflict-of-interest disclosure.

Key data

• QHD 5500Rmb715/tUp 0.3% week on week as of May 15.
• CCI 5500Rmb835/tUp 1.3% week on week.
• Shanxi Datong 5800 mine-mouth priceRmb705/tUp 2.9% week on week.
• Liulin No. 4 mine-mouth priceRmb710/tUp 2.9% week on week.
• Coking coal FOR priceRmb1,640/tUp 1.9% week on week.
• QLD priceUS$239/tDown 0.4% week on week.
• April coal output386 million tonnesDown 1% year on year and 12.5% month on month; year-to-date output was up 1.2% year on year.
• Power plant inventories0.5%-2.9% below last yearSxcoal data show that as of May 14 inventories at major coastal and inland power plants were at relatively low levels.

Impact & implications

The implications for the coal market are mildly positive: rebounding domestic coal prices, low inventories, and summer demand may support thermal coal prices, benefiting coal assets with high sensitivity to domestic thermal coal prices; however, weaker overseas prices, renewable substitution, and seasonal output swings may still limit price upside.

Risks

• Pressure from renewable-energy substitution may weaken thermal power and thermal coal demand.
• If summer cooling demand is weaker than expected, support for thermal coal prices may be insufficient.
• If power plant inventories recover quickly, the price support from low inventories could fade.
• Falling overseas coal prices may weigh on market sentiment and imported coal prices.
• The report includes disclosures of Morgan Stanley's holdings, market-making, investment-banking, or service relationships with some coal companies, so the independence of the research should be assessed carefully in light of the disclosures.

What to watch

• Whether hot weather and cooling electricity demand lift thermal power generation in summer.
• Whether inventories at major coastal and inland power plants remain below last year's levels.
• Subsequent week-on-week changes in QHD 5500, CCI 5500, and Shanxi mine-mouth prices.
• Whether NEWC and QLD continue to diverge from domestic coal prices.
• Whether monthly coal output recovers after the heating season and whether year-to-date growth remains intact.