Energy supply is still under pressure, and the national development and Reform Commission strictly controls coal prices. Since the beginning of this year, due to the covid-19 epidemic, the shift of monetary policies of major economies, especially the intensification of geographical conflicts between Russia and Ukraine, the international commodity price situation has become more severe, complex and uncertain, and China’s energy supply has presented new pressure. 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. 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. Since March, the national development and Reform Commission has held several meetings to promote the release of production capacity, increase reserves and stabilize supply and price. At the meeting on March 18, it was pointed out that medium and long-term contracts should be fully signed, confirmed and standardized.
Control and upgrade, study and clarify the identification standards of illegal acts of bid up prices in the coal field. Recently, the price department of the national development and Reform Commission held another special meeting to study and clarify the identification standards of illegal acts of bid up prices in the coal field. This meeting means that the control of coal price will be upgraded again and the coal price will be brought into the scope of legal control. The meeting pointed out that in the next step, the national development and Reform Commission will, according to the opinions of all parties, pay close attention to improving the relevant provisions on the identification standards of illegal acts of bid up in the coal field, promote relevant departments to strengthen law enforcement and inspection, effectively maintain the price order of the coal market, and better ensure national energy security.
The national standing committee will guarantee and increase supply again to give play to the role of coal as the main energy. On April 20, Premier Li Keqiang presided over the executive meeting of the State Council on improving energy supply and social security capacity. In terms of specific measures, first, we should give full play to the role of coal as the main energy, increase coal production capacity by 300 million tons this year through nuclear production, expansion and new production, and use market-oriented and legalized methods to guide the operation of coal prices within a reasonable range; Second, we should promote the transformation of energy conservation and emission reduction, flexibility and heating of coal-fired power units, and improve energy efficiency. The scale of transformation in the whole year exceeded 220 million kilowatts; Third, nuclear power should be developed in an orderly manner under the premise of strict supervision and ensuring absolute safety, and three new nuclear power unit projects in Zhejiang Sanmen, Shandong Haiyang and Guangdong Lufeng, which have been included in the national plan after years of preparation and comprehensive evaluation and review, should be approved.
The state’s control over coal prices is escalating day by day. Under the control of market-oriented and legalized methods, coal prices are expected to return to a reasonable range. Meanwhile, the notice on further improving the price formation mechanism of the coal market will be implemented from May 1, and the reversal of the thermal power sector is in sight. We maintain the investment rating of “optimistic” in the industry, continue to be optimistic about the three main investment lines of large hydropower, scenery operators and clean energy transformation, and suggest paying attention to power operators with good cash flow. Recommend 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 prices fell less than expected; The construction and consumption of new energy are less than expected;
