Coal mining: the price rise exceeds the expectation and then leads to policy intervention. After the festival, it falls first and then rises

Market review this week:

CITIC coal index closed at 2445.0 points, down 8.4%, underperforming the CSI 300 index by 3.9pct, ranking 28th in the list of gains and losses of CITIC primary sector.

Analysis of key areas:

Power coal: coal prices rush to the top in stages and tend to be calm in the short term. As of Friday, the mainstream quotation of port q5500 was about 1070 yuan / ton, up 70 yuan / ton on a weekly basis. In terms of producing areas, although state-owned coal mines do not stop production during the Spring Festival, some private mines have stopped production and holidays, some coal mines maintain single shift production operations, and the overall supply continues to tighten; Meanwhile, before the Spring Festival and Winter Olympics, some power plants and chemical industries still need to replenish their warehouses. In addition, the price of ports increases, the platform and long-distance transportation are active, the supply of coal mines in production is tight, and the prices of some producing areas rise steadily. In terms of ports, the source of shipping goods is limited, the superimposed coal price of origin and port coal price continue to hang upside down, and the transfer in volume decreases; As the NDRC issued a document emphasizing supply guarantee and price stabilization, the market has different expectations for the future market. Under the influence of weather and epidemic situation, the transportation capacity is limited and the transfer out volume decreases; On the whole, the transfer in is less than the transfer out, and the inventory in Beigang continues to decline. Downstream, with the Spring Festival approaching, the daily consumption has gradually dropped. This week, the second round of large-scale rain and snow this winter has officially started. Many places have ushered in snowfall and cooling weather, and residents' electricity consumption has strengthened. However, considering that the Spring Festival is approaching, downstream industrial enterprises have holidays one after another, and industrial power consumption is weak. Overall, the daily consumption of the power plant began to weaken; In order to ensure the safety of coal and electricity during the Winter Olympic Games, some regions advocate the local new year under the superposition of the epidemic, and the regional power plants still need to replenish the storage. In terms of import, the international demand for thermal coal in winter is still supported, and the price of imported coal continues to rise; Recently, the profit of imported coal is poor, and the inventory of Chinese power plants is sufficient, which limits the enthusiasm of Chinese end users and traders to purchase imported coal. The reduction of the amount of imported coal will form a strong support for China's coal market. On the whole, the Spring Festival and Winter Olympics are approaching, and the terminal replenishment task is upgraded; Under the expectation of local Chinese new year, some power plants actively pick up the warehouse. In addition, in order to make up for the production affected by the shutdown during the Winter Olympic Games, some non electric terminals such as cement chemical industry have rushed to work, and the demand for raw materials such as coal has also been released, resulting in the continuous rise of coal prices. After the release of phased demand and the cooling of speculation, the market will return to calm. With the approaching of the Spring Festival, the daily consumption has an inflection point, adding that China's coal output is still high, and it is difficult for coal prices to rise continuously.

Coking coal: both supply and demand are weak, and the price may maintain stable operation. This week, the coking coal market maintained stable operation, and the price of coking coal in origin rose and fell. As of Friday, the Shanxi main coke of Jingtang Port closed at 2830 yuan / ton, unchanged on a week-on-week basis. This week, near the Spring Festival, some coal mines in Shanxi, Shaanxi and Inner Mongolia have stopped production for holidays, which has affected the decline of coal mine output. In addition, due to the impact of the epidemic and weather, road transportation is slightly hindered, and the overall supply of coking coal market is tightening. In terms of importing Mongolian coal, due to the severe epidemic situation in Mongolia and the approaching Spring Festival, the customs clearance at Ganqi Maodu port has remained low recently. According to sxcoal data, the customs clearance at Ganqi Maodu port has been 4 days, with an average of 89 vehicles per day, a decrease of 3 vehicles compared with last Sunday; Due to the low level of customs clearance, most small and medium-sized traders have left the city for vacation recently. The transaction in the port market is light, and the quotation of Mongolian coal is mainly stable temporarily. The mainstream quotation of Mongolian 5 raw coal is about 2000-2060 yuan / ton, and the mainstream quotation of Mongolian 5 clean coal is about 2400-2500 yuan / ton. On the demand side, with the continuous improvement of downstream inventory, the winter storage of coke and steel is coming to an end, the replenishment of coke enterprises has ended, the procurement rhythm continues to slow down, and under the weakness of both supply and demand, the price of coking coal is expected to maintain a stable operation.

Coke: the downstream procurement slows down and the mainstream operates stably for the time being. This week, the coke market temporarily operated stably. On the supply side, with the Winter Olympic Games approaching, coke enterprises implemented relevant production restriction policies, superimposed poor profits of coke enterprises, and the operating rate decreased slightly. The demand for new blast furnace production and the demand for hot metal production in the downstream continue to rise. However, the steel mills around Beijing, Tianjin and Hebei have begun to limit the production of the Winter Olympic Games. Among them, some blast furnaces in Hebei have successively implemented the requirements of stopping and limiting the production. The production limit of some steel mills has even reached more than 50%, and the operating rate has only increased slightly; However, the replenishment of stock before the festival is coming to an end, and some steel mills have implemented the production restriction of the Winter Olympic Games. A few steel mills have begun to control the arrival of goods and gradually digest the existing raw material inventory. The procurement rhythm of steel mills has slowed down. On the whole, affected by the large-scale snowfall and the reduction of procurement demand, the coke storage in the coke plant of coke enterprises is accumulated, the shipping pressure is gradually obvious, the superposition of raw coal is stable, the cost support is weak, and the operation is weak in the future or stable.

Investment strategy. Recently, due to the higher than expected rise in coal prices, the port transaction reached more than 1200 yuan / ton, which once again attracted the attention of relevant departments. According to the WeChat official account of the national development and Reform Commission, the NDRC has held a special meeting to deploy coal for stable production and stable price during the Spring Festival. At the same time, we will work with relevant departments to further strengthen market price regulation and supervision, severely crack down on illegal price behaviors in the spot and futures markets, and ensure that coal prices operate within a reasonable range. Affected by this, superimposing the off-season demand after the festival, the coal price probably fell by a certain margin, but we believe that the decline is an opportunity for bargain hunting. At present, the high-intensity production state of coal mines is difficult to sustain (the follow-up faces the two sessions in March and the "20th National Congress" in the second half of the year, and the intensity of safety supervision may be significantly increased) & there is no need to worry too much about the demand under the background of steady growth. The downward space of coal prices after the festival is limited, and it is expected that the Q1 performance of coal enterprises will still be very bright; After this round of adjustment, the current valuation of most companies is less than 5 times, and the safety margin is very high. Stick to the core assets and be optimistic about the valuation repair of high long-term association and high score red coal enterprises. Key recommendations: China Shenhua Energy Company Limited(601088) , China Coal Energy Company Limited(601898) , Shaanxi Coal Industry Company Limited(601225) , Pingdingshan Tianan Coal Mining Co.Ltd(601666) . In addition, the transformation of traditional energy enterprises under the goal of "double carbon" is worth looking forward to. The key recommendations are power investment energy (green power), Shan Xi Hua Yang Group New Energy Co.Ltd(600348) (energy storage), Huaibei Mining Holdings Co.Ltd(600985) (new materials, green power), Yankuang energy (new materials, green power), Shanxi Meijin Energy Co.Ltd(000723) (hydrogen energy) and China Xuyang group (hydrogen energy). Actively layout the national reform in Shanxi, focusing on Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) , Shanxi Coking Coal Energy Group Co.Ltd(000983) with expected asset injection.

Risk tip: China's output release exceeded expectations, the downstream demand was less than expected, and the on grid electricity price was significantly reduced.

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