The Zhitong Finance App learned that Guotai Junan released a research report saying that the coal stock market that began in September 2023 will continue until 2024, and the logic behind it has long since broken away from the traditional investment framework. Behind the market, there are not only deep changes in the medium- to long-term supply and demand structure of the coal industry, but also changes caused by current investment methodologies. The supply-side of the coal industry has less upward flexibility in the future, a tight balance between supply and demand over a long period of time, stronger predictability of profits, ultra-long-term operating assets, and a gradual increase in the sector's dividend rate. The reshaping of the valuation of a “stable high-dividend” asset such as coal is probably just beginning.

Incidents:

On February 8, the Shanxi Provincial Emergency Management Department, the Shanxi Bureau of the State Mine Safety Supervision Administration, and the Shanxi Provincial Energy Administration issued the “Notice on Launching Special Remediation of the “Three Supermarkets” and Concealed Work Surfaces in Coal Mines, deciding to immediately carry out special remediation of the “Three Supermarkets” and hidden work surfaces of coal mines throughout the province.

▍ Guotai Junan's main views are as follows:

Shanxi has carried out “three super” remediation, and coal mines are under pressure to cut production.

Key elements of the “Three Super” coal mines in Shanxi Province include: the issuance of production and operation indicators by supercapacity, the production situation of super-capacity coal mines, the production situation of super-level supersurface organization, and the arrangement of hidden work surfaces. The remediation period is from the date the document is issued to May 31. According to market information, some coal companies have now received production reduction notices.

At the same time, judging from the work report of the Shanxi Shaanxi Government in '24, the 24-year production target is less than the actual production in 23. Since September '23, the country has successively introduced policies such as “Opinions on Further Strengthening Mine Safety Work”, “Coal Mine Safety Regulations”, and the “Three-Year Action Plan for Tackling the Roots of Production Safety (2024-2026)” to strengthen safety supervision. Safety priorities in 24 may come first, and supply contraction may exceed market expectations.

Tighter safety regulations in Shanxi may further affect coking coal.

Shanxi Province is the main production area of coking coal in China, accounting for about 50% of the supply of coking refined coal. Therefore, special coal mine production remediation work in Shanxi Province will mainly affect the national supply of coking coal. The scarcity of coking coal resources is once again highlighted, and the shortage of supply will support coking coal prices to remain high.

The recovery of new construction on the demand side is also imminent, and price flexibility can be expected.

Recently, the biggest decline in LPR history. Social finance reached a new high in January, and the issuance of trillions of special treasury bonds was completed. The demand side of new construction in the upcoming spring may also exceed market expectations, while coal prices are likely to show higher elasticity due to low coal inventories in ports, the return of cold waves in some regions of the country, and demand to replenish stocks in the non-electric coal industry.

Risk warning:

Global oil and gas prices fell more than expected; demand for coal in the non-electricity sector fell short of expectations.