Core view
In the second half of last year, there was a shortage of coal and power in some areas. Last year, affected by the global covid-19 epidemic, liquidity flooding, supply bottlenecks and other factors, there was a shortage of energy supply worldwide, and the prices of international bulk commodities such as oil, natural gas, coal and iron ore rose sharply. China’s energy supply and demand is tight, coal prices rise sharply, and the phenomenon of “switching off and power rationing” has emerged in various places. Thanks to the great attention of the Party Central Committee and the State Council, efforts have been made to promote the work of increasing production and ensuring supply. The energy supply and demand in the heating season is relatively stable without power and gas restrictions, which effectively ensures the stable operation of the economy and society and the people’s warm winter.
Recently, there has been new pressure on energy supply. Since the beginning of this year, the international commodity price situation has become more severe, complex and uncertain due to the covid-19 epidemic, the shift of monetary policies in major economies, especially the intensification of geographical conflicts between Russia and Ukraine. Recently, the international oil price broke through the $110 per barrel mark, the prices of coal, natural gas and iron ore remained high, and the prices of corn and other grains also showed a rising trend, posing new challenges to China’s energy supply and maintaining supply and price stability.
Energy supply and price stability will become a short-term priority. The word “stability” will be the theme of development throughout the year. In the context of “stability”, the security of energy, electricity and other supply has become the focus. The “government work report” of the two sessions stressed the need to focus on stabilizing the macro-economic market, ensuring food and energy security, ensuring people’s livelihood and the normal production and operation of enterprises, enhancing China’s resource production guarantee capacity, improving the national strategic material reserve system and ensuring the supply of primary products. Recently, with the continuous rise of foreign energy prices, the national development and Reform Commission has begun to focus on ensuring the supply and price of China’s energy. Since March, the national development and Reform Commission has held several special meetings on the inter ministerial coordination mechanism for coal, electricity, oil and gas transportation support to promote the release of production capacity, increase reserves and ensure supply and price stability. We speculate that energy supply and price stability will become the focus of short-term work.
Attention has been paid to the relationship between coal and electricity, and the prices of coal and electricity are expected to be further straightened out. Affected by the rising coal price, “market coal, planned electricity” and other factors, the phenomenon of “coal power topping the bull” was serious in the fourth quarter of last year, and coal power enterprises generally suffered large losses. The relationship between coal and electricity has attracted more and more attention, and policy documents have been issued one after another to help coal and electricity enterprises transmit the cost of coal raw materials through market-oriented reform. On February 24, the national development and Reform Commission issued the notice on further improving the coal market price formation mechanism, pointing out that we should improve the coal price regulation mechanism and guide the coal price to operate within a reasonable range. At the same time, we should again emphasize the improvement of the coal and electricity price transmission mechanism and guide the coal and electricity price to be mainly formed through medium and long-term transactions. Coal and electricity prices are expected to be further rationalized.
Under the background of stable energy supply and price, the coal price is expected to be controlled in a reasonable space. At the same time, with the reform of power marketization, it is possible for coal-fired power generation enterprises to fully transmit the changes of fuel cost through marketization. Coal fired power generation enterprises are expected to end their losses and enter a new profit cycle. We maintain the industry’s “optimistic” investment rating and recommend paying attention to power operators with good cash flow. Recommend Huaneng Power International Inc(600011) , Huaneng Lancang River Hydropower Inc(600025) , Sichuan Chuantou Energy Co.Ltd(600674) , China Yangtze Power Co.Ltd(600900) , Huaneng Power International Inc(600011) electric power, Datang new energy and other companies.
Risk tip: the implementation of carbon neutralization policy is not as expected; The reform of electricity marketization is less than expected; Coal supply is less than expected; Coal price control is not as expected;
