Event:
Recently, Russia recognized the Republic established by civil society organizations in the East and launched special military operations in Ukraine. The United States and the G7 said they would implement "destructive sanctions" against Russia. Affected by the conflict between Russia and Ukraine, global stock markets fell sharply and global energy prices rose sharply.
Comments:
1. Impact on the global energy situation
In the short term, the conflict will affect the global energy supply and boost the further rise of energy prices. Russia is a major exporter of oil, natural gas and coal. In 2020, Russia's oil exports accounted for 11.08%, natural gas exports accounted for 16.07% and coal exports accounted for 17.08%. Therefore, any policy restricting Russia's energy exports will directly affect the global energy supply, thus raising energy prices. Although the United States has not clearly imposed direct sanctions on Russian energy, Germany has announced the suspension of the certification of Beixi No. 2 natural gas pipeline under the pressure of the United States. At present, disturbed by the conflict between Russia and Ukraine, the expected supply of energy is reduced and the price rises sharply. On February 24, the price of Brent crude oil exceeded US $100 / barrel for the first time since 2014. The price of UK natural gas futures rose for three consecutive days, with the largest increase of 50.34% in a single day. The spot price of Newcastle thermal coal reached US $248.35/ton, up nearly 50% from the end of last year.
In the medium and long term, driven by the fundamental capacity cycle, energy prices are expected to remain high and show an upward trend. Although the United States said it would impose "devastating" sanctions on Russia, we believe that the United States is unlikely to impose sanctions on Russian energy, because according to the estimation of our energy team, the daily export volume of Russia is 5 million barrels, while the destocking rate of global crude oil from January to February this year is about 1 million barrels / day. Therefore, if this part of Russian supply disappears or decreases significantly, It may greatly push up the prices of energy such as oil and gas, and also exacerbate inflation in the United States and China. We believe that the rise in global energy prices since last year is essentially due to the shortage caused by the supply capacity cycle, and its sustainability and intensity will far exceed expectations. As an uncertain event, the conflict between Russia and Ukraine has only exacerbated the energy tension. Therefore, even if Russia does not cut off energy supply, energy prices will remain high under the contradiction of supply and demand mismatch, and show an upward trend in the medium and long term.
2. Impact on European energy structure
Europe's energy trade structure may change. Germany will have to buy natural gas and coal from other countries after the conflict between Russia and Ukraine, the German economy minister said on the 24th; On the 25th, the Italian prime minister said that in response to the possible energy crisis, he planned to reopen coal-fired power plants. It is expected that in the future, Europe may rely more on coal to provide basic energy supply due to the reduction of oil and gas imports. In addition, Europe may increase energy imports from the United States and other countries. According to the data of the US energy information administration, in January 2022, the export volume of liquefied natural gas from the United States to Europe almost doubled compared with that in November last year. We believe that the energy trade structure of Europe will change, the proportion of coal may increase, and the energy export status of the United States will rise.
The conflict between Russia and Ukraine is expected to accelerate the transformation of renewable energy in Europe. European fossil energy demand is heavily dependent on imports. In 2020, European natural gas consumption was 379.94 billion cubic meters, of which imports accounted for 85.84%. Europe's dependence on Russian fossil energy has always been one of the reasons for its restricted diplomacy with Russia. In 2021, Russia provided more than 41% of natural gas, nearly 27% of crude oil and liquid products separated from natural gas to the EU. Last year, the insufficient output of new energy in Europe triggered an increase in the demand for natural gas. Superimposed on the tight market supply, the price of natural gas in Europe rose rapidly. In recent years, Europe has been determined to expand the proportion of renewable energy in order to reduce the impact of Geopolitics on energy security. The conflict between Russia and Ukraine is expected to become a catalyst for the development of clean energy in Europe. However, the transformation of energy structure is a long-term plan. If there are substantive measures against Russia's energy sanctions in the short term, it is expected that Europe may need to go through a very difficult transformation period.
3. Impact on China's energy and coal industry
China Russia energy cooperation is expected to deepen to a certain extent. China is an important energy export direction of Russia. Of the 5 million barrels of oil (including condensate) exported per day in 2020, 1-2 million barrels went to China. In 2021, crude oil imported from Russia accounted for about 15% of the total import. At the same time, China is also Russia's largest natural gas exporter in Asia. While reducing energy flows to Europe, Russia is expected to increase energy exports to China, but there is uncertainty in infrastructure. Earlier, China and Russia signed a large natural gas order, announcing an increase of 10 billion cubic meters on the basis of the promised annual transmission of 38 billion cubic meters of natural gas to China in the next 30 years from 2019 (5 billion cubic meters in the first year, gradually reaching 38 billion cubic meters); Russian officials have also said that in the future, coal exports to China will increase from about 53 million tons to 100 million tons. We believe that this volume is subject to infrastructure problems and can not be achieved immediately. Because Russia's energy exports have always adopted the layout of "looking around", Europe has a relatively perfect natural gas transportation and consumption system, and the development of the East is still in its infancy. There are two natural gas supply and demand channels between China and Russia. One is the east natural gas pipeline, with a designed gas transmission capacity of 38 billion m3. The other is a large Arctic LNG project, with about 4 million tons of LNG exported to China. In the long run, China Russia energy cooperation will be closer, but it still needs 3-4 years of infrastructure construction.
The rise of oil and gas prices will drive the increase of global coal demand, and the gap between coal supply and demand may further increase. Due to the significant price comparison advantage, the price of coal per unit calorific value is significantly lower than that of oil and gas. The expected rise in oil and gas prices is expected to tilt global energy consumption towards coal. However, Russia's coal is subject to the lag of infrastructure construction such as railways and ports, and will not flow to the international coal market soon, thus aggravating the contradiction between global coal supply and demand, Drive the rise of international coal prices. In the coal market price formation mechanism newly released by the national development and Reform Commission on the 24th, it is clear that the reasonable operation range of 5500 kcal medium and long-term transaction price of Qinhuangdao underground coal is 570770 yuan / ton. Compared with the long-term association price of 500570 yuan / ton implemented in 17-21 years, the previous upper limit has become the current lower limit, and the central certainty of coal price has increased. Therefore, the rise of international coal prices and the high price of Chinese coal may lead to price inversion, and the demand for overseas coal will be transferred to China. Coal prices fluctuated sharply last year. Driven by the policy of stabilizing prices and ensuring supply, the contradiction between supply and demand eased at the end of last year. However, we believe that the problem of industrial capacity cycle mismatch has not changed. When the demand side continues to increase and the supply side elasticity is very small, coal prices are easy to rise but difficult to fall. It is a general trend to go up after maintaining a high shock, The business cycle of the industry will continue to improve.
In terms of investment opportunities, we believe that we are at the early stage of a new round of upward cycle of the coal economy, and the fundamentals, policies and companies resonate. At this stage, it is right to allocate the coal sector. We should continue to look at the coal sector comprehensively and continue to suggest paying attention to the historic allocation opportunities of coal. Focus on three main lines: first, under the tight supply and demand of coal in China, low inventory, high price and policy encouragement to increase production and ensure supply, favorable listed companies of thermal coal: Yanzhou Coal Mining Company Limited(600188) , Shaanxi Coal Industry Company Limited(601225) , China Shenhua Energy Company Limited(601088) and China Coal Energy Company Limited(601898) ; Second, it is suggested to pay attention to the southwest coking coal leader Guizhou Panjiang Refined Coal Co.Ltd(600395) , which has a large space for endogenous extension, and the pioneer of state-owned enterprise reform Pingdingshan Tianan Coal Mining Co.Ltd(601666) ; Third, it is suggested to pay attention to Shanxi Coking Coal Energy Group Co.Ltd(000983) and Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) , which have great potential for extensive expansion brought by the increase of asset securitization rate of state-owned coal groups.
Risk factors: there is a crisis like decline in the economy outside China; The uncertainty after the deterioration of the situation of the Russian Ukrainian war; The uncertainty of China's international energy related policies.
