In the report “medium and long term demand outlook for China’s energy and coal” released on December 14, 2021, we analyzed the logic of the increase of energy consumption elasticity (total energy consumption growth / real GDP growth) year by year since 2016 and the subsequent deductive trend. Here, we add to split the driving force of this round of upward energy consumption elasticity, Combined with the latest economic growth and energy consumption data of 2021, the calculation of energy and coal demand in 2022 and beyond is updated.
In the process of accelerating the elasticity coefficient of overall power consumption in the past two years, the contribution of secondary production has dropped significantly. Since 2016, the elasticity coefficient of power consumption in China has increased, with an average annual increase of 0.226 from 2016 to 2021q3; In the past two years, the average annual increase of 2020-2021q3 was 0.243, and the increase was accelerated. In terms of industries, among the 0.226 average annual increase from 2016 to 2021q3, primary, secondary, tertiary and urban residents contributed 0.002, 0.184, 0.033 and 0.006 respectively, with contributions of 1.03%, 81.69%, 14.81% and 2.47% respectively; Among the 0.243 increased annually from 2020 to 2021q3, primary, secondary, tertiary and urban residents contributed 0.018, 0.133, 0.060 and 0.031 respectively, with contributions of 7.59%, 54.90%, 24.65% and 12.86% respectively; It can be seen that in the process of accelerating the elasticity coefficient of overall power consumption in the past two years, the contribution of secondary production has dropped significantly, down 26.79 PCT; The power consumption of primary and tertiary industries and urban and rural residents increased significantly, and the contribution increased by 6.56, 9.84 and 10.39 PCT respectively.
Coal consumption is expected to maintain an average annual growth of 2.07% from 2022 to 2025. With the adjustment of China’s economic structure, the contribution of traditional heavy chemical industry to China’s economy and energy and power consumption is gradually giving way to the “two new and one heavy” industry. With the decline of traditional heavy chemical industry with high energy consumption / power consumption per unit of GDP and low energy / power consumption elasticity, it is bound to lead to the decline of energy consumption / power consumption per unit of GDP and the marginal improvement of energy / power consumption elasticity. In 2021, GDP increased by 8.1% and energy consumption per unit GDP decreased by 2.7%, so the growth rate of total energy consumption in 2021 is about 5.2% and the elasticity coefficient of energy consumption is 0.64. From 2019 to 2021, the compound growth rate of energy consumption is 3.71%, the compound growth rate of GDP is 5.18%, and the average elasticity coefficient of energy consumption is 0.716. Considering the high elasticity coefficient of energy consumption under the disturbance of the “epidemic” in recent two years, we believe that under the assumption of an average annual GDP growth rate of 5% from 2022 to 2025, the elasticity coefficient of energy consumption of 0.66 is more reasonable. From 2022, China’s total energy consumption will reach 5.94 billion tons of standard coal by 2025 with an average annual growth rate of 3.3%. After deducting the contribution of oil, natural gas, primary power and other energy from the total energy consumption, the growth rate of coal consumption from 2022 to 2025 is 2.05%, 2.50%, 2.06% and 1.68% respectively.
Industry rating and investment suggestions: at present, the market seriously underestimates the toughness, elasticity and sustainability of coal demand, the production capacity cycle is down, the supply elasticity converges, the prosperity and sustainability of the industry are expected to exceed expectations, and the sector valuation is far from reflected. Undervaluation, high performance certainty and considerable dividend income make the coal sector “both offensive and defensive”, and the systematic revaluation of the market has just begun to maintain the “optimistic” rating of the industry. It is suggested to pay attention to three main lines: first, Yankuang energy, Shaanxi Coal Industry Company Limited(601225) , China Shenhua Energy Company Limited(601088) , which is the leader of low value and high dividend power coal; Second, Pingdingshan Tianan Coal Mining Co.Ltd(601666) , Guizhou Panjiang Refined Coal Co.Ltd(600395) with both scarcity of resources and significant growth; Third, the expansion potential of state-owned coal group {60198001} assets {0003} is greater.
Catalytic factors: the installed capacity of non fossil energy such as wind, light, water and nuclear energy is less than expected; The consumption of wind power and photovoltaic power generation is less than expected.
Risk factors: macroeconomic stall and downward; The development and popularization of energy-saving and consumption reducing technologies exceed expectations and suppress the elasticity coefficient of energy consumption; Controllable nuclear fusion technology is mature.
