Introduction to this report:
From January to February, the imported coal volume decreased significantly, the overseas coal price rose rapidly, the benchmark price of Indonesian coal rose again in March, and the upside down of coal prices outside China restrained imports, further increased China’s coal demand and supported China’s prices.
Summary:
Event: on March 7, the General Administration of Customs announced that 35.391 million tons of coal had been imported from January to February 2022, a year-on-year decrease of 13.95%.
Coal imports fell significantly from January to February, mainly due to Indonesia’s coal export ban in January and the inversion of coal prices outside China. From January to February 2022, China imported 35.391 million tons of coal, a year-on-year decrease of 13.95%. The total price of imported coal was 37.39 billion yuan, a year-on-year increase of 116.5%, and the price of imported coal decreased. On the one hand, due to Indonesia’s coal export ban in January, Indonesian coal accounts for about 60% of China’s coal imports, which has a great impact; On the other hand, from the perspective of the average price of imported tons of coal, the average import price of coal from January to February was 1056.5 yuan / ton, with a significant year-on-year increase of 151.6%. The average price of imported coal was 961 yuan / ton higher than the average price of 5500k power coal market in Qinhuangdao from January to February. The sharp rise of overseas coal prices led to the inversion of coal prices outside China and restrained import demand. It is expected that after March, due to the continuous price inversion, imports will continue to decline year-on-year.
Indonesian coal prices rose rapidly, and import substitution supported China’s coal demand. Since 2022, the Indonesian coal price has risen rapidly. The Indonesian government has raised the benchmark price of coal for two consecutive months. The benchmark price in March was US $203.69/t, an increase of US $15.31/t month on month. According to the benchmark price in March, the arrival price of Indonesian coal is about 1515 yuan / T, which is about 1440 yuan / T higher than the price of coal shipped from Qinhuangdao to Guangzhou Port Company Limited(601228) market. Under the influence of China Australia relations, the import of Australian coal and the import of Russian coal are limited by transportation capacity and settlement. The rapid rise of Indonesian coal is inversely linked with domestic trade coal, curbing import demand and turning to China for substitution. In particular, the southern coastal power plants with a large amount of imported coal have turned to the northern port to buy coal, so as to further improve China’s coal demand.
The conflict between Russia and Ukraine continues, and global coal prices are expected to rise and remain strong, supporting Chinese prices. With the intensification of the conflict between Russia and Ukraine, the global price of fossil energy has accelerated, the oil price is approaching us $120 / barrel, and the coal price in Newcastle, Australia has reached nearly US $270 / ton, breaking the high point in 2021. In recent years, with the continuous adjustment of power supply structure in Europe, the enhanced substitution efficiency of gas turbine and coal power, the rise of natural gas price and insufficient supply, Germany, Italy and other European countries said they might restart coal power, and the substitution effect will further enhance the global demand for coal. Due to the long-term low global coal capital expenditure and the steep global supply curve of fossil energy, it is expected that the global coal price will still rise and remain strong, further supporting China’s price.
Value discovery will become the main theme of coal stock investment in 2022, and explore three alpha opportunities at the same time.
1) under the policy adjustment, the high elasticity of performance brought by the sharp rise in prices will be difficult to appear in 2022, but it can be clear that the profit center of the industry will jump to a higher level. It is estimated that the profit of the sector increased by about 80% in the first quarter, and the value discovery will become the main theme of coal stock investment in 2022. 2) The industry capital expenditure – cash flow – Finance – profit – dividend will be continuously optimized. The new dividend scheme under the high long-term association and high profit in the annual report is worth looking forward to, and the transformation of some enterprises is expected to accelerate.
Investment suggestions: 1) annual main line: high dividend, green power transformation, growth coal chemical industry, China Shenhua Energy Company Limited(601088) / Pingdingshan Tianan Coal Mining Co.Ltd(601666) , Gansu Jingyuan Coal Industry And Electricity Power Co.Ltd(000552) / power investment energy, China Xuyang group / Ningxia Baofeng Energy Group Co.Ltd(600989) ; 2) Sitting on overseas coal resources: Yankuang energy (also high dividend); 3) Resource quality enterprises: Shanxi Lanhua Sci-Tech Venture Co.Ltd(600123) , Shaanxi Coal Industry Company Limited(601225) , Huaibei Mining Holdings Co.Ltd(600985) , Shanxi Coking Coal Energy Group Co.Ltd(000983) , Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) , China Coal Energy Company Limited(601898) , Shanxi Coal International Energy Group Co.Ltd(600546) , Guizhou Panjiang Refined Coal Co.Ltd(600395) .
Risk tip: global oil and gas prices fell more than expected; Coal supply remained high.
