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Chinese market remains oversupplied

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World Coal,

The Chinese coal market remains oversupplied, according to a recent research note from Marex Spectrum, with coal consumption significantly lower this year than the past two years.

“Coal consumption in China has been weak and there is little evidence to suggest that the situation will change soon,” said Georgi Slavov, Head of Research at Marex Spectron. “It is the overall supply and demand (S&D) balance of coal in the country which will define the pressure points for price.”

According to Marex Spectron’s monthly S&D model for the Chinese coal market, there may be some ground behind the most recent price stablisation as the market tightened in May and June. However, “the output of the model falls short of any decisive change in the balance between supply and demand as the reading for June still points towards [an] oversupplied market” with July and August also forecast to remain oversupplied, continued Slavov.

There may be some better news in 4Q15 when seasonal coal consumption starts to increase. But this is also the period of highest production in China. “The seaborne market may require support from elsewhere,” Slavov concludes.

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