The Zhitong Finance App learned that Huatai Securities released a research report saying that in 2024, Shanxi may welcome a major year of coal mine safety supervision, and it may be difficult for coal production to continue to grow throughout the year. As the main producer of coking coal in the country, Shanxi has had a big impact on coking coal supply. The bank is optimistic about coking coal prices this year. The average price of main coking coal in Shanxi is expected to be 2,200 yuan/ton throughout the year. The price difference between main coking coal and thermal coal may widen, increasing from an average of about 1,100 yuan/ton since 2018 to 1,400 yuan/ton.

Huatai Securities's views are as follows:

In 2024, Shanxi may welcome the big year of coal mine safety supervision, and it may be difficult for coal production to continue to grow throughout the year

In 2024, Shanxi may usher in a big year of coal mine safety supervision. The State Council's Work Safety Commission will supervise production safety work in mines in Shanxi this year. On February 7, the Shanxi Provincial Energy Administration issued a notice to carry out special remediation of the “Three Supermarkets” and hidden work surfaces in coal mines. Strict inspections will be carried out on the coal mine's super-capacity production, super-level super surface organization production, and overstaffed production. The high number of coal mine safety accidents in Shanxi Province in 2023 triggered the country's strengthening of mine production safety supervision in Shanxi. This may have an inhibitory effect on coal mine production in Shanxi in 2024.

According to the 2024 work report of the Shanxi provincial government, coal production in 2023 will increase by 57.43 million tons on top of an annual increase of more than 100 million tons for two consecutive years, to reach 1,378 million tons. However, in 2024, the goal of the coal industry in Shanxi is to release advanced coal production capacity in accordance with the law on the premise of ensuring safe production, and make every effort to stabilize coal production. This shows that it may be difficult for Shanxi's coal production to increase further in 2024 after a sharp increase in strong supply guarantees in the past few years.

As the main producer of coking coal in the country, Shanxi has had a big impact on coking coal supply. We are optimistic about coking coal prices this year.

Global coking coal production capacity will be limited in 2024-25, making it difficult to expand domestic production capacity

Global coking coal production may be unlikely to increase further in the next few years. According to IEA statistics, in addition to China, the global coking coal (including injection coal) will add about 31 million tons in 2024-25. According to Huatai statistics, the country's coking coal production capacity is currently about 8.4 million tons, which means that the world's new coking coal production capacity in 2024-25 is only about 40 million tons, which is equivalent to 3.6% of the global coking coal production of 1,113 billion tons in 2023.

However, considering the potential decline in production due to the depletion of resources in coking coal mines, the share of new production capacity is expected to be even lower. However, due to the geological reasons of resource formation itself, coking coal mines in China generally have deep mining depths and high gas levels. Increasing nuclear production capacity is more difficult than that of thermal coal mines.

We expect global coking coal production to remain at current levels or grow only slightly over the next few years.

Occupying half of the coking coal industry, Shanxi has a great influence on the national coking coal market

As a province that accounts for half of the country's coking coal resources and production, Shanxi Province has a great impact on the supply of the national coking coal industry.

The amount of resources available for coking coal in Shanxi Province is 156.25 billion tons, accounting for 45.2% of the country's coking coal resources. Of these, high-quality coking coal and fertilizer coal have 44.37 billion tons, accounting for 58.6% of the country's coking coal and fertilizer coal resources. In 2023, Shanxi Province produced 730 million tons of coking coal, accounting for 55% of the country's coking coal production. In comparison, the resource endowments and mining conditions for coking coal in Shanxi Province are superior to those of other coking coal producing provinces in the country.

In 2024, with the strengthening of coal mine production safety supervision in Shanxi Province, it may be difficult for the province's coal production to increase further. This will also curb the expansion of coking coal production across the country.

Continue to be optimistic about coking coal price performance in 2024

We are optimistic about the price of coking coal in 2024. It is estimated that the average price of main coking coal in Shanxi will be 2,200 yuan/ton throughout the year. The price difference between main coking coal and thermal coal may increase from an average of about 1,100 yuan/ton since 2018 to 1,400 yuan/ton. Compared with thermal coal, there is less new production capacity for coking coal, and it is more difficult to expand domestic production stocks (there are many high-gas mines and deep coal mining due to geological reasons formed by coking coal), and there is no similar replacement for thermal coal demand from new energy sources because it takes time for non-blast furnace ironmaking production to increase.

From a global perspective, the price of overseas main coking coal has continued to be higher than domestic prices since 2023, which is in stark contrast to the domestic and foreign price differences of thermal coal. In 2024, we prefer coking coal over thermal coal.

Risk warning:

Coking coal production exceeded expectations or global steel demand was weaker than expected.