The coal price of origin continues to fall. As of December 31, the pithead price of Shaanxi Yulin power lump coal (q6000) was 1090.0 yuan / ton, down 100.0 yuan / ton on a weekly basis and up 475 yuan / ton on a year-on-year basis; The pit mouth price of sticky coal (including tax) (q5500) in the southern suburb of Datong was 680.0 yuan / ton, down 100.0 yuan / ton on a weekly basis and up 70 yuan / ton on a year-on-year basis; Inner Mongolia Dongsheng large clean coal truck plate price (q5500) was 910.0 yuan / ton, down 27.0 yuan / ton on a weekly basis and up 411 yuan / ton on a year-on-year basis. This week, it continued to be affected by the sharp reduction of outsourcing prices of large groups, the weakening of downstream demand, the slowdown of origin sales and the continuous decline of coal prices.
The enthusiasm of downstream transportation decreased and the port inventory fell. This week, 5333 trains arrived from Qinhuangdao Port Railway, with a decrease of 22.12% over the previous week; Qinhuangdao Port handled 445000 tons, an increase of 7.23% over the previous week. The average weekly inventory level of China’s important ports (Qinhuangdao, Caofeidian and SDIC Jingtang Port) was 10.9625 million tons, down 28000 tons compared with 10.9907 million tons last week, a decrease of 0.26% on a weekly basis. As of December 29, the cargo ship ratio (inventory to ship ratio) of the four major ports around the Bohai Sea (Qinhuangdao port, Huanghua port, Caofeidian port and east port of Jingtang Port) was 12.3 (week to week ratio increased by 3.52).
The short-term decline in coal prices may narrow significantly. As of December 30, the coal inventory of the eight coastal provinces was 33.434 million tons, with a decrease of 1.41 million tons (a decrease of 4.05%) on a weekly basis. The daily consumption was 2.313 million tons, with a rise of 169000 tons / day (7.88%) on a weekly basis. The available days were 14.5 days and a decrease of 1.80 days on a weekly basis. As of December 31, the market price of Qinhuangdao port thermal coal (q5500) produced in Shanxi was 800.0 yuan / ton, down 140.0 yuan / ton on a weekly basis and up 12.5 yuan / ton on a year-on-year basis. International coal price: as of December 30, the spot price of power coal in Newcastle port was US $170.6/t, down US $16.78/t on a weekly basis and up US $86.87/t on a year-on-year basis. As of December 31, the active contract of thermal coal futures fell by 35.6 yuan / ton to 672.2 yuan / ton compared with the same period last week, and the futures discount was 127.8 yuan / ton. Under the influence of the cold wave, the daily consumption of the power plant has further increased, which has a certain support for the downstream just needed procurement. However, under the condition of sufficient downstream inventory and strong market bearish sentiment, the end users mainly wait and see, and the procurement slows down; At the same time, the market risk is large, and it is difficult for traders to improve their procurement enthusiasm; In general, the downstream maintains a normal rhythm of destocking, but the current market coal price has approached the long-term agreement price. At the same time, Indonesia’s restriction on coal export in January has boosted market sentiment to a certain extent, and the decline of short-term coal price may be significantly narrowed.
Coke: the signs of stronger supply and demand are becoming more and more obvious. As of December 31, 2021, Fenwei CCI Luliang Zhun and metallurgical coke reported 2560 yuan / ton, with a weekly increase of 100 yuan / ton and a year-on-year increase of 380 yuan / ton; CCI Rizhao quasi primary metallurgical coke reported 2830 yuan / ton, unchanged on a week-on-week basis, with a year-on-year increase of 260 yuan / ton. This week, the commencement of steel plant continued to fall slightly, and the commencement of coking plant increased. At present, northern steel enterprises have the expectation of limited production in the Winter Olympic Games and are not enthusiastic about coke procurement; However, with the continuous decline in the start-up of steel enterprises, the steel inventory continues to decline, the southern steel enterprises are highly profitable, have high enthusiasm for start-up and procurement, and the coke inventory is gradually transferred to the port and downstream. With the improvement of the inventory structure and the meager profit of coke enterprises, the market is more willing to increase.
Coking coal: the price is strong, and the medium and long-term scarcity is expected to gradually highlight. As of December 30, CCI Shanxi low sulfur index was 2420 yuan / ton, unchanged on a week-on-week basis, with a year-on-year increase of 918 yuan / ton; Shanxi’s high sulfur index was 1987 yuan / ton, with a weekly increase of 11 yuan / ton and a year-on-year increase of 866 yuan / ton; Lingshi fat coal index reported 2000 yuan / ton, with a weekly increase of 100 yuan / ton and a year-on-year increase of 1000 yuan / ton; Puxian 1 / 3 coke index was 1900 yuan / ton, unchanged on a week-on-week basis, with a year-on-year increase of 700 yuan / ton. Recently, due to the stricter environmental protection and security inspection in the production area, and with the completion of the annual task, some coal mines began to take the initiative to limit the shutdown, superimposed with the restrictions on the customs clearance of Mongolian coking coal, China’s coking coal supply continued to tighten; At the same time, due to the replenishment of storage in winter, the purchasing enthusiasm of downstream steel coke enterprises has increased, which supports the rise of coking coal prices this week to a certain extent. In the medium and long term, the newly-built coking coal mines are insufficient, the depletion of resources is becoming more and more prominent, the supply side will shrink significantly, and the price of supporting coking coal is easy to rise but difficult to fall; With the change of demand structure for coking coal due to the large-scale blast furnace and coke oven, high-quality coking coal (main coke, fat coal, etc.) resources are more scarce.
According to the notice issued by the Indonesian Ministry of energy and mineral resources (esdm) on December 31: “due to the shortage of coal supply for Chinese power plants from January to February this year, in order to avoid the power crisis caused by coal shortage, the government decided to ban all coal exports from January 1 to 31, all coal produced will be supplied to Chinese power plants, and the coal that has been prepared for shipment or shipment in Hong Kong will also be transported to the power plants.” The reason is that the rapid recovery of Indonesian Chinese industry and economy has led to a surge in power demand, and about 60% of its power structure comes from coal power; At the same time, since the second half of 2021, the sharp increase in China’s import demand has driven the surge in international coal prices, and more Indonesian coal has been exported to China, resulting in a continuous decline in China’s supply and an inventory crisis for power plants. Indonesia is the world’s third largest coal producer (estimated annual output of 600 million tons in 2021), the world’s largest coal exporter (export of 360 million tons in October 2021), and China’s largest source of imported coal (China imported 178 million tons of Indonesian coal in November 2021, a year-on-year increase of 63%, accounting for about 61% of China’s total coal imports). With the continuous improvement of energy demand due to the economic recovery of Indonesia and China, a large number of thermal power plants under construction are put into operation, and the potential for coal production is limited, the shortage of coal supply in Indonesia may be a long-term phenomenon (see the in-depth study on international coal supply and demand situation released by Xinda energy team on July 18, 2021 for analysis), which will undoubtedly have a significant impact on the supplement of China’s coal supply.
We believe that at present, we are at the initial stage of a new round of upward cycle of coal economy, and the fundamentals, policies and companies resonate. At this stage, the allocation of coal plate is at the right time. At present, the legalization of China’s coal off balance sheet capacity is coming to an end: the space for nuclear increase / approval capacity converges rapidly and the threshold for nuclear increase is raised, limiting the short-term production potential of coal enterprises; Considering the decline of coal enterprises’ willingness and ability to build mines and the construction cycle of more than 3 years, coal supply may be difficult to respond to demand growth during the 14th Five Year Plan period, and the price will remain high. Under the general cost reduction, efficiency increase and endogenous epitaxial growth of the industry, corporate profits are expected to rise. At the same time, on November 17, the national standing committee decided to set up a 200 billion refinance to support the clean and efficient utilization of coal; In December, the central economic work conference reiterated that “based on the basic national conditions dominated by coal, we should pay attention to the clean and efficient utilization of coal, increase the consumption capacity of new energy, and promote the optimal combination of coal and new energy.” In the upward trend of the industry boom, the leading coal enterprises rely on their own resource / capital / technology endowment advantages to promote the energy revolution, layout transformation and upgrading, new growth poles or repay shareholders, and can improve the income level of investors in the long term. At this stage, the industry fundamentals, the underlying logic of the policy and the direct effect are favorable for the repair and improvement of the valuation of the sector. Considering the certainty of the high growth of the industry’s performance in the fourth quarter and the first half of next year, it is the best stage for bargain hunting to allocate the coal sector.
Investment rating: we continue to look at the coal sector in an all-round way and continue to suggest paying attention to the historic allocation opportunities of coal. It is suggested to pay attention to three main investment lines: first, Yankuang energy, Shaanxi Coal Industry Company Limited(601225) , China Shenhua Energy Company Limited(601088) , the leader of low value and high dividend power coal; Second, Pingdingshan Tianan Coal Mining Co.Ltd(601666) , Guizhou Panjiang Refined Coal Co.Ltd(600395) with both scarcity of resources and significant growth; Third, the Shanxi Coking Coal Energy Group Co.Ltd(000983) and Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) with great extension expansion potential brought by the improvement of asset securitization rate of state-owned coal group.
Risk factors: coal mine safety production accidents in key companies; The macro economy has stalled and declined sharply.
