In the post covid-19 pneumonia era, the short-term recovery of market demand and the rapid elimination of traditional energy have resulted in a global energy shortage. The prices of coal, crude oil and natural gas have increased significantly in stages since 2021, forming a cost impact on the downstream market.
As a large coal country, China’s market price is greatly affected by policies. Since the second half of 2021, a series of national policies to ensure supply and stabilize prices have significantly cooled the coal market. Under the influence of multiple factors, how will China’s coal market deduce in 2022? On February 25, Zhou Tai, vice president of Minsheng Securities Research Institute and chief analyst of energy industry, visited the live interview room of securities times · e company V to analyze the trend of coal market in the year of the tiger.
tight supply side leads to high coal price operation
Under the global energy shortage in 2021, China’s coal price also rose abnormally. The annual average price of thermal coal reached 1030 yuan / ton, a record high, and set a new historical extreme value of 2587.5 yuan / ton on October 20, 2021. After a number of relevant national departments have introduced measures to ensure supply and stabilize prices, the prices of thermal coal and coking coal showed a short-term halving trend in the fourth quarter of 2021. However, in 2022, the global energy shortage continues, the supply of coal is tight, and the news of high prices is also heard.
According to the data released by the National Bureau of statistics in early February, coal prices generally rose in late January 2022 compared with mid January. Among them, the price of Shanxi mixed coal (5000 kcal) increased by 13.3%, the price of Datong mixed coal (5800 kcal) increased by 11%, and the price of coking coal (main coking coal) increased by 1.6%.
“During the Spring Festival, Inner Mongolia Eerduosi Resources Co.Ltd(600295) The daily output is basically about 1.83 million tons, a significant decline from the highest point of 2.93 million tons. During the Spring Festival, many places in the South ushered in low-temperature and snowy weather, the load of power plants was high, and the demand for rigid replenishment drove the price rise. At the same time, the Spring Festival and the Olympic Games have mainly led to the delayed release of some downstream demand, especially the coal demand of iron and steel enterprises. As iron and steel enterprises are still limiting production in the Winter Olympic Games, this part of demand will lag behind previous years. ” Referring to the reasons for the sharp rise in prices in China’s black market after the Spring Festival in 2022 and the effectiveness of policy guarantee, Zhou Tai said that after the Spring Festival, the resumption of work and production in the main coal producing areas accelerated, and the start of downstream demand for steel and other products was slightly delayed due to the holding of the Winter Olympic Games. At the same time, the demand was still supported due to the cold wave weather in the south, Superimposed with the infrastructure stimulus under the background of “steady growth”, the improvement expectation of downstream demand margin is strong. The supply side is still in the state of guaranteed supply. It is expected that the supply and demand will increase in the same direction, and the industry is expected to maintain a slightly tight supply.
Zhou Tai also analyzed the reasons for the overall rise and fall of China’s coal prices in 2021, saying that on the supply side, the lack of investment in long-term capacity construction is the main reason. 15 years later, due to the decline of profits, the investment in fixed assets in the industry decreased significantly. 16 years later, after the supply side reform, the excess capacity was effectively removed, but the construction of new capacity did not increase synchronously, There are few new mines put into operation after 2020. Therefore, the growth of coal production after 2020 is very limited. The increment of imported coal is also insufficient, especially after January 2022, the international coal price accelerated to a record high, resulting in the inversion of China’s international coal price, resulting in a significant decline in China’s import volume this year. On the demand side, the performance exceeded expectations and the water from hydropower was insufficient. The hydropower generation decreased by 2.5% year-on-year in 2021. Affected by this, the thermal power generation increased significantly. The growth rate of thermal power generation in 2021 was 8.4%. The mismatch between supply and demand led to the rise of prices. After the implementation of the policy of ensuring supply and stabilizing price in the fourth quarter of 2021, the price fell back.
Due to the shortage of supply and the escalation of tensions between Russia and Ukraine, the global coal price rose by more than one third in January, approaching the record high set in October 2021, and the benchmark Newcastle coal index rose to US $262 per ton.
Meanwhile, on the last day of 2021, the Indonesian government suddenly announced that due to the shortage of coal supply for Chinese power plants from January to February, it would stop coal export from January 1 to January 31, 2022, so as to alleviate the power crisis caused by China’s coal supply shortage.
In view of the impact of the international coal market situation on China’s coal prices, Zhou Tai believes that with the effective control of the overseas epidemic and the repair of overseas coal demand, overseas coal prices will rise. The weakening price advantage will make it difficult for imports to increase significantly. Foreign prices are higher than Chinese prices, and imports are expected to decline sharply. Tensions between Russia and Ukraine have led to a general rise in international energy prices. Not only are the prices of coal, crude oil and natural gas at a high level as a whole. Affected by this, the coal-fired power generation of European countries has increased sharply. The data show that the coal import volume of Europe increased by about 35% year-on-year in January, exacerbating the sharp rise in international coal prices.
Indonesia’s export ban is a short-term action aimed at increasing Indonesia’s supply to China, but it also objectively reflects the reality of poor local production potential in Indonesia. Although the export has recovered at present, the international coal price has not dropped significantly, so it has not played a great role in easing China’s tension.
China long term association price center lower coal enterprises’ profits are stable
What is the expected trend of China’s coal market price in 2022 under a series of national policies to ensure supply and stabilize price? Can the state of high profitability of coal enterprises continue?
Zhou Tai believes that China’s coal market price is expected to remain high in 2022. It is expected that the average price in 2022 will still increase compared with that in 2021, and the market will be dominated by seasonal fluctuations.
“In 2021, the coal price rose very fast, and the price change of listed companies was slower than the market price. Especially in the stage of sharp price rise in October, listed companies did not raise prices as much as the market price. Therefore, the profit growth rate of listed companies was weaker than that of port prices.” Zhou Tai said that the fluctuation range of port price in 2022 is expected to be weaker than that in 2021. At the same time, the benchmark price of the long-term association is expected to increase from 535 yuan / ton to 670 yuan / ton, and the coverage of the long-term association is also improved, which means that the profit center of listed companies is expected to rise. With the rise of the profit center and the enhancement of profit stability, the industry valuation is also expected to rise.
“Recently, the national development and Reform Commission issued the notice on further improving the coal market price formation mechanism” , the document defines the reasonable range of medium and long-term coal price, which is between 570-770 yuan and about 670 yuan. If the central price is adjusted according to the index, it is more reasonable for both parties of coal and electricity at the price specified in the medium and long-term contract, which can realize a certain profit for both parties, which is conducive to the performance of the medium and long-term contract. This year, the medium and long-term proportion of coal power exceeds 80%, which will be further improved in the future. The central price of 670 is slightly higher than the previous benchmark price of the long-term association, and the profit of companies dominated by the long-term association has increased slightly. At the same time, the online fluctuation range is only 100 yuan, and the stability of the company’s future profits will be enhanced. For power plants, the fluctuation of 100 yuan coal cost can also be effectively resolved through the fluctuation of 20% of electricity price. ” He said.
For the question of whether the prosperity of the coal industry can continue under the background of China’s implementation of the dual carbon goal, Zhou Tai believes that under the dual carbon background, traditional coal enterprises have also opened the prelude to the transformation to new energy. Due to the lack of fixed asset investment in the early stage of the industry, the bottleneck of coal production capacity may continue. Under the background of stable economy, it is expected that the future coal price will not have the basis for a sharp decline, so the profits of coal enterprises are generally good. The capital expenditure of the industry has generally declined, and coal enterprises generally have rich economic strength, which is enough to support them to transform and invest in new energy.
“However, from the perspective of the main coal industry, the supply is still facing a bottleneck. Even if the new production capacity is built from now on, considering the construction cycle of 3-5 years, the output will be released after 2026. Therefore, it is expected that the industry will maintain a high boom until then.” He said.
