China’s thermal coal prices remained under pressure in May, as off-season demand kept market fundamentals weak.
Source: Jintou Think Tank
China’s thermal coal prices remained under pressure in May, as off-season demand kept market fundamentals weak. While June typically brings a seasonal uptick in electricity consumption, analysts say any price rebound is likely to be limited due to elevated inventories and increased renewable energy output.
Demand from both power and non-power sectors softened in May. Entering June, coal supply remains ample despite expectations of tighter safety inspections during the national “Work Safety Month.” While some small mines may scale back production, major producers are maintaining output to offset lower prices. On the demand side, rising temperatures are expected to drive up residential electricity usage in mid-to-late June, gradually boosting daily coal burn at power plants. As of June 3, daily coal consumption at coastal power plants across eight provinces stood at 1.767 million tonnes, up 76,000 tonnes from the previous week. However, inventories rose as well, reaching 33.52 million tonnes—an increase of 720,000 tonnes—keeping restocking behavior cautious.
Port inventories at Bohai Rim hubs have edged down slightly but remain high overall. Most power plants have stockpiles sufficient for over 20 days of operation. Meanwhile, strong renewable output continues to weigh on coal-fired generation, limiting the upside for coal prices.
The market is expected to remain oversupplied through early June. A modest, short-lived price recovery may occur later in the month if daily coal burn accelerates and supply tightens slightly. Still, with inventories at elevated levels and clean energy eroding coal’s market share, any rebound is expected to be minimal.
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