1. The contradiction between supply and demand of power coal is still in the 14th Five Year Plan period, and the demand is still difficult to reach the peak: the action plan for carbon peak before 2030 of the State Council requires to accelerate the pace of coal reduction, strictly and reasonably control the growth of coal consumption during the 14th Five Year Plan period, and gradually reduce it during the 15th Five Year Plan period. However, in practice, reducing coal supply is easier than reducing coal consumption. Especially under the multiple reduction policy means, coal production is easy to reduce but difficult to increase. On the demand side, according to our calculation, if the installed demand for thermal power is required to increase by 0, the installed CAGR of wind power and photovoltaic during the 14th Five Year Plan period will need to be as high as 15% and 25%. According to mainstream expectations, the growth rates of the above two should be around 10% and 20% respectively. This means that the demand for coal and electricity is difficult to reach the peak during the 14th five year plan, and will maintain a certain low-speed growth.
2. Outlook for supply and demand balance in 2022: under the neutral assumption, the output needs to increase by 3.5% at the same time. Because of the strong policy attribute of coal supply, we will adopt a similar treatment to that of OPEC supply in the crude oil balance sheet by IEA when forecasting the balance sheet – forecasting the demand and pushing back the amount of Chinese supply. Based on the basic assumptions of GDP growth of 5%, power consumption intensity of 1.25 and zero growth of coal consumption in the industrial field, it is estimated that the coal output of China Shipbuilding Industry Group Power Co.Ltd(600482) in 2022 will need about 3.5 billion tons (year-on-year + 3.5%). In November 2021, the daily output of thermal coal reached 10.59 million tons, which is close to the upper limit of production capacity. Capital expenditure and new projects in the coal industry are very few, and the increase of total capacity in the future is very limited. In the follow-up observation of the impact of the policy on output, if the output growth rate next year can be controlled within 3.5%, the supply and demand is expected to maintain a tight balance.
3. What deserves more attention is the volatility and unpredictability of demand and price. In the future, the fluctuation of renewable power generation output and the lag of policy regulation will significantly increase the price fluctuation of thermal coal. The higher the proportion of renewable energy, the greater the risk due to the passive fluctuation of coal demand caused by the fluctuation of its output (the sharp rise of natural gas and coal prices in Europe this year is because the macro demand exceeds expectations and the superimposed wind power output is not good). Coal demand may face a new normal of increased volatility.
Risk warning: the growth rate of renewable installed capacity is faster than expected, and there is a risk of decline in coal demand during the 14th Five Year Plan period; The fluctuation of renewable energy output brings greater unpredictability to coal demand, which is easy to lead to significant fluctuations in coal prices; The promotion of industrial “coal to gas” has increased its impact on coal demand in the industrial field and the impact of national policies on power coal supply.
