The supply shortage situation continues, and the valuation and repair market of the coal sector is expected to start. Coal prices fell rapidly this week (February 14-18, 2022), mainly due to the impact of the price limit policy, but the price limit is still at a high level, which is better than the previous pessimistic market expectation. At the same time, the price limit leads to the failure of price response to supply and demand. From the data before the price limit, the supply is still tight, and the price limit can not alleviate the supply tension. Based on this, the policy side also began to focus on solving the problem of tight supply and began to increase the approval of new production capacity. An announcement was issued on Huaibei Mining Holdings Co.Ltd(600985) February 18. Taohutu mine, a subordinate mine of the company, was approved with a proposed production capacity of 8 million tons / year. However, the construction cycle of new capacity requires 3-5 years, which is difficult to have an effect on the current tight supply. In the above context, we believe that the valuation repair market of the sector is expected to start.
Thermal coal demand may be delayed, but will not be absent. According to the coal resources network, after the 15th day of the first month, the coal mines in the main producing areas resume production. Affected by the price limit policy, the coal prices in the producing areas are mostly reduced according to the price limit. In the downstream, due to the price limit policy, terminals and traders have a strong wait-and-see mood, and transactions are cold. Most purchases are based on long-term association. Affected by the cold wave weather, the daily consumption of the power plant rebounded, but the procurement slowed down, showing a de inventory situation. At present, the transaction is cold, mainly due to the demand delay caused by price limit, which is not without demand. In the later stage, the inventory of power plants will decline and the demand for replenishment will be released, which will still support the coal price. For listed companies, although the current price is limited, the price level can still ensure that the profit is at a high level. At present, the valuation of Listed Companies in the sector is at a low level, and high profit helps to promote the valuation.
Coke fundamentals are expected to improve. According to the coal resources network, at present, due to the influence of environmental protection, profit and loss and other factors, the operating rate of coking enterprises mostly remains low. In terms of demand, the inventory of some steel mills has declined recently, and their enthusiasm for coke procurement has been improved. At the same time, the end of the Winter Olympic Games is imminent, the downstream production restriction is expected to be alleviated, the demand is expected to be released, and the coke fundamentals are gradually improving.
Coking coal prices are expected to run smoothly. According to the coal resources network, after the Spring Festival, the coal mines in the producing areas have basically resumed normal production and the supply has increased. In the downstream, the coking enterprises have a low operating rate due to the impact of the Winter Olympics and have a poor enthusiasm for the purchase of raw coal. In the future, with the end of the Winter Olympics, the production limit of coke steel may be reduced, and there may be a certain demand for replenishment of raw coal. Overall, the coking coal market is expected to operate smoothly in the short term.
Investment suggestions: 1) companies with stable profits and high cash flow are also expected to face value revaluation. It is suggested to pay attention to Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) , Shanxi Coal International Energy Group Co.Ltd(600546) , China Shenhua Energy Company Limited(601088) , Shaanxi Coal Industry Company Limited(601225) . 2) The transformation of traditional energy enterprises to new energy has kicked off, and power investment energy and Yankuang energy are recommended. 3) The coking coal sector is expected to benefit from the demand growth driven by infrastructure investment. It is suggested to pay attention to Huaibei Mining Holdings Co.Ltd(600985) , Shanxi Lu'An Environmental Energydev.Co.Ltd(601699) , Pingdingshan Tianan Coal Mining Co.Ltd(601666) , Shanxi Coking Coal Energy Group Co.Ltd(000983) .
Risk tips: 1) risk of economic slowdown. 2) Risk of a sharp fall in coal prices. 3) Risk of policy change.
