The national development and Reform Commission issued the notice on further improving the coal market price formation mechanism on February 25. The notice specifies the reasonable range of medium and long-term transaction price of coal extraction in four key areas:
the reasonable range of coal price with calorific value of 5500kcal in Shanxi is 370-570 yuan / ton;
the price of coal with calorific value of 5500kcal in Shaanxi is 320-520 yuan / ton;
the price of coal with calorific value of 5500kcal in Mengxi area is 260-460 yuan / ton;
the price of coal with a calorific value of 3500 kcal in eastern Mongolia is 200-300 yuan / ton.
Affected by this news, A-share coal stocks fell sharply in the afternoon of the 25th. As of the close, Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) fell by 7.18%, Shanxi Coking Coal Energy Group Co.Ltd(000983) fell by 5.01%, Shaanxi Coal Industry Company Limited(601225) , China Coal Energy Company Limited(601898) and Lu’an Huanneng all fell by more than 4%.
In the futures market, coal futures also plunged, and the main contract of power coal futures once hit the limit. As of the closing, the thermal coal 2205 contract fell by more than 9%, and the coke 2205 contract fell by more than 6%
guide coal prices to operate within a reasonable range
The notice pointed out that coal prices should be guided to operate within a reasonable range. Coal prices are formed by the market. The national development and Reform Commission, in conjunction with relevant parties, has comprehensively taken measures such as connection between supply and demand, reserve throughput, import and export regulation and transportation coordination to promote the operation of coal prices within a reasonable range. When the coal price rises significantly or is likely to rise significantly, the price intervention measures will be launched in time according to the procedures in accordance with Article 30 of the price law to guide the coal price to return to a reasonable range; In case of excessive decline in coal prices, comprehensive and appropriate measures shall be taken to guide the reasonable recovery of coal prices.
The notice points out that from the market operation for many years, the medium and long-term transaction price of underground coal (5500 kcal) in Qinhuangdao port is relatively reasonable at 570-770 yuan per ton (including tax), the coal production, circulation and consumption can be basically stable, and the upstream and downstream industries of coal and electricity can achieve better coordinated development. Timely evaluate and improve the reasonable interval. The notice shall be implemented from May 1, 2022. The provisions of this Circular shall not apply to the price of imported coal.
Wan Jinsong, director of the price department of the national development and Reform Commission, said on February 24 that there was excessive capital speculation behind the irrational rise in coal prices this year. This time, the introduction further improves the coal market price formation mechanism and puts forward a reasonable range of coal prices, which is to delimit the boundary line of government price regulation and supervision in advance and set a “traffic light” for capital, which is conducive to stabilizing market expectations, reducing the space for speculation and speculation, and effectively preventing the malicious speculation of speculative capital
downward pressure on coal price in the second quarter
Citic Securities Company Limited(600030) the research report believes that the new mechanism helps to stabilize the long-term price expectation of electric coal, and has limited short-term impact on companies with large annual long-term cooperative coal and non electric coal.
“There is downward pressure on coal prices in the second quarter.” According to the research report, the new coal price mechanism means that the stability of profits has been greatly improved for large coal enterprises dominated by medium and long-term contracts. At the same time, if the market price of non long-term contract exceeds the coal price range of medium and long-term contract, corresponding policy adjustments will be made to promote the market price to return to the price range limited by medium and long-term contract. The volatility of coal prices (including long-term association prices and market prices) will be greatly reduced, which means that the profit stability of coal enterprises, especially large coal enterprises with a high proportion of long-term association, will be significantly improved, and the dividend yield of coal enterprises will be paid more attention by the market.
The report believes that relatively sufficient supply is a key factor in the smooth operation of the new price mechanism. The government has changed from the coal price marketization since 2013 to the current price marketization within the range. An important basis of the price regulation mechanism outside the range is whether the coal production capacity / output can fully meet the growth of coal demand.
The notice talked about the construction of coal product reserve and capacity reserve. The report believes that the improvement of product and capacity reserve mechanism will escort the new price mechanism. Considering the limited new capacity of coal in the next few years, the further increase and release of stock capacity will be the key to ensure the smooth operation of the new price mechanism.
