Market review this week:
CITIC coal index closed at 2530 points, down 1.1%, outperforming the Shanghai and Shenzhen 300 index by 0.91pct, ranking 12th among the 30 CITIC primary sectors.
Focus area analysis:
Power coal: the Spring Festival is approaching, and the market tends to be calm. As of Friday, the mainstream quotation of port q5500 was about 945 yuan / ton, up 115 yuan / ton on a weekly basis. In terms of producing areas, the supply of coal mines rebounded, and the output of Inner Mongolia Eerduosi Resources Co.Ltd(600295) areas increased significantly. The sales situation of coal mines in producing areas has improved, the number of coal mine hauling vehicles has increased, and the prices of some coal mines with low quotations have increased slightly. In terms of ports, in order to ensure the safety of coal and electricity during the Winter Olympic Games, the traditional warehouse replenishment task of the terminal before the Spring Festival has been upgraded; With repeated outbreaks, some regions advocate local New Year celebrations, downstream user purchases have increased, and the transfer out volume has increased month on month. The transfer in is less than the transfer out, and the inventory in Beigang continues to decline. In the downstream, the daily consumption fluctuated at a high level, the available days decreased to about 14 days, and the regional power plants still have the demand for replenishment. The temperature in most parts of the country is low, the demand for heating power is sufficient, and the daily consumption remains high and volatile; The power plant warehouse remained high, but based on the strong performance of daily consumption, the available days of inventory decreased to about 14 days. In terms of import, the international demand for thermal coal in winter is still supported, and the price of imported coal remains volatile; In addition, the recent poor profit of imported coal and sufficient inventory of Chinese power plants limit the enthusiasm of Chinese end users and traders to purchase imported coal. The reduction of the amount of imported coal will form a strong support for China’s coal market. On the whole, the Spring Festival and Winter Olympics are approaching, and the terminal replenishment task is upgraded; Under the expectation of local Chinese new year, some power plants actively pick up the warehouse. In addition, in order to make up for the production affected by the shutdown during the Winter Olympic Games, some non electric terminals such as cement chemical industry have rushed to work, and the demand for raw materials such as coal has also been released, resulting in the continuous rise of coal prices. After the release of phased demand and the cooling of speculation, the market will return to calm. With the Spring Festival approaching, the daily consumption is about to have an inflection point. In addition, China’s coal output is still high, and it is difficult for coal prices to rise continuously.
Coking coal: the pace of downstream procurement is accelerated and the price continues to rise. The coking coal market operated strongly this week, with a large increase in main coking coal and fat coal, and a relatively small increase in coking coal. As of Friday, the Shanxi main coke of Jingtang Port had closed at 2830 yuan / ton, up 230 yuan / ton on a weekly basis. This week, affected by the epidemic in some areas of the main producing areas, some coal mines temporarily showed signs of shutdown, and local safety inspections were still strictly implemented, and the coal mine output was relatively low. In terms of importing Mongolian coal, the recent customs clearance number at Ganqi Maodu port fluctuated at a low level. According to sxcoal data, Ganqi Maodu port had 4 days of customs clearance, with an average of 98 vehicles per day, an increase of 11 vehicles over last Sunday; Due to the low customs clearance and limited trading resources at the port, the price of Mongolian coal continues to rise. The mainstream price of Mongolian 5 raw coal is about 1950-2000 yuan / ton and the mainstream price of Mongolian 5 clean coal is about 2350-2400 yuan / ton. On the demand side, the scope of the fourth round of coke increase has gradually expanded, the coke market is in strong operation, and the Spring Festival is approaching. Coke enterprises still focus on actively replenishing warehouses, and the demand for replenishing warehouses before the steel plant Festival continues to release. Coke steel enterprises have a good overall demand for raw coal, and the pace of procurement has been accelerated. On the whole, the demand for supplementary storage in winter continues to release, the coke market sentiment continues to improve, focusing on active procurement, the demand for coking coal is good, while the supply increment is limited, the downstream supplementary storage is still difficult, the supply and demand of coking coal is tight, and the price is still rising.
Coke: the scope of the fourth round of increase is gradually expanded, and there is still room for increase in the follow-up. This week, the third round of coke increase was fully implemented, with a cumulative increase of 500-520 yuan / ton. On the supply side, some coke enterprises in Shandong, Shanxi, Hebei, Jiangsu and other regions successively raised the coke price by 200 yuan / ton, the scope of the fourth round of coke increase gradually expanded, the coke market sentiment continued to improve, the superposition of environmental protection and production restriction was further relaxed, the production enthusiasm of some coke enterprises was improved, and the operating load continued to increase slightly. On the demand side, near the end of the year, the downstream steel mills continued to resume production, superimposed new blast furnaces were put into operation one after another, and the hot metal output rebounded significantly; Before the festival, steel mills mainly actively purchased, but some areas were affected by the epidemic, the transportation situation was slightly weak, and the coke replenishment of steel mills was poor. On the whole, the low inventory & winter storage has been strengthened, the downstream demand has improved, the purchasing enthusiasm has improved, the shipment of coke enterprises has improved, and the coke supply and demand situation has continued to improve; Superimposed coking coal prices stabilized and rebounded, cost support appeared, short-term coke fundamentals continued to improve, and there is still action force in the short term.
Investment strategy. This week, coal enterprises successively released performance forecasts, and the net profit showed a multiple growth. The main reason is that in the process of energy transformation, the demand for products in traditional industries itself is rigid, and on the supply side, under policy constraints and pessimistic expectations of enterprises, enterprises are significantly reducing capital expenditure on traditional businesses even if their profits increase greatly and their cash flow is abundant, As a result, when demand expansion meets supply constraints, prices rise sharply. We believe that this year’s opportunity lies in “transformation” and the switching of valuation system. On the one hand, due to the significant increase of the benchmark price of the long-term association, the profits of coal enterprises will remain high. At present, the valuation is generally at the level of 4 ~ 7 times, and the safety margin is high. On the one hand, under the background of “double carbon”, the proportion of coal in China’s energy structure may decline rapidly after 2030. Transformation and development is a problem that coal enterprises have to face. With its abundant cash flow and important strategic position, coal enterprises have unique advantages in transformation and development. At present, many coal enterprises have issued long-term plans for transformation, and the curtain of transformation of coal enterprises is slowly opening. The transformation of traditional energy enterprises under the goal of “double carbon” is particularly worth looking forward to. Stick to the core assets and be optimistic about the valuation repair of high long-term association and high score red coal enterprises. Key recommendations: China Shenhua Energy Company Limited(601088) , China Coal Energy Company Limited(601898) , Shaanxi Coal Industry Company Limited(601225) , Pingdingshan Tianan Coal Mining Co.Ltd(601666) . In addition, it is worth looking forward to the transformation of traditional energy enterprises under the goal of “double carbon”, focusing on Power Investment energy (green power), Shan Xi Hua Yang Group New Energy Co.Ltd(600348) (energy storage), Huaibei Mining Holdings Co.Ltd(600985) (new materials, green power), Yankuang energy (new materials, green power), Shanxi Meijin Energy Co.Ltd(000723) (hydrogen energy) and China Xuyang group (hydrogen energy). Actively layout the national reform in Shanxi, focusing on Jinneng Holding Shanxi Coal Industry Co.Ltd(601001) , Shanxi Coking Coal Energy Group Co.Ltd(000983) with expected asset injection.
Risk tip: China’s output release exceeded expectations, the downstream demand was less than expected, and the on grid electricity price was significantly reduced.
