The price pressure test under the weak demand of thermal coal is completed. As of May this week, the price of Qindao coal / Huandao power was flat at 1200t, according to Qindao daily. Superimposed with the impact of the epidemic in the off-season, the recent decline in demand is higher than in previous years. Under the background of China’s full supply in the first and second quarters, the performance of coal prices is still strong. As the epidemic situation has been effectively controlled one after another, China is about to return to work and production and economic stimulus policies. At the same time, summer is coming, and there is sufficient power to replenish storage in the downstream. The maintenance of “west to East Coal Transportation” Daqin Railway Co.Ltd(601006) was completed on May 20, and the demand side is expected to rebound. In terms of supply, the increment of imported coal is insufficient under the influence of international situation and upside down of price difference, and the price is expected to stabilize and rebound. In addition, the national development and Reform Commission released the policy interpretation of coal price regulation on May 20, defining power coal as “coal sold to power generation and heating enterprises or with a calorific value of less than 6000 kcal”. It is clear that the price limit is only for power coal, and there is no limit on non power coal. Under the background of demand rebound, the spot price elasticity is expected to be fully released.
Coking coal fundamentals have improved. According to the coal resources network, as of May 20, the price of main coking coal in Jingtang Port was 3050 yuan / ton, the same as last week. Some accident coal mines and maintenance coal mines in Shanxi have basically returned to normal. According to the coal resource network, the supply of coking coal continues to increase; In terms of demand, due to the rapid decline of coking coal price this week, the purchasing enthusiasm of individual coking enterprises increased, and some coal mine inventories began to be consumed, and the market demand improved.
The downward space of coke price market is limited. According to wind data, as of May 20, the price of Tianjin Port Co.Ltd(600717) primary metallurgical coke was 3510 yuan / ton, with a decrease of 200 yuan / ton on a weekly basis. The continuous decline of coke price has seriously compressed the profits of coke enterprises, weakened the production enthusiasm of some manufacturers, and even limited production. Although individual coke enterprises began to purchase in small quantities, the overall mood is mainly wait-and-see, and the coke supply has shrunk slightly. In the downstream, the finished product profit is still low, and the steel plant is not willing to purchase. However, at present, the start-up of the steel plant is high and stable, and the hot metal output is at a relatively high level. There is still room for policy easing after the resumption of work and production. The demand for infrastructure and real estate is expected to drive the demand for steel, and there is limited room for further decline in coke prices.
Investment suggestion: the stress test of recent demand has been completed, the certainty of demand improvement in the later stage is strong, and the sector market is expected to start. In terms of target, we recommend the following main investment lines: 1) companies with stable profits and high cash flow are expected to usher in value revaluation. It is recommended to pay attention to Shanxi Coal International Energy Group Co.Ltd(600546) , Shaanxi Coal Industry Company Limited(601225) , China Coal Energy Company Limited(601898) , Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) , China Shenhua Energy Company Limited(601088) . 2) The transformation of traditional energy enterprises to new energy has kicked off, and power investment energy and Yankuang energy are recommended. 3) The coking coal sector is expected to benefit from the demand growth driven by real estate and infrastructure investment. It is suggested to pay attention to Huaibei Mining Holdings Co.Ltd(600985) , Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) , Pingdingshan Tianan Coal Mining Co.Ltd(601666) , Shanxi Coking Coal Energy Group Co.Ltd(000983) .
Risk tips: 1) risk of economic slowdown. 2) Risk of a sharp fall in coal prices. 3) Risk of policy change.
