The Zhitong Finance App learned that Debon Securities released a research report saying that safety production in coal mines has now become a national priority. Safety inspections are expected to remain at high pressure, capacity utilization is constrained, and supply contraction expectations are strengthened. Debon Securities believes that with the holding of the Politburo meeting on July 24, 2023 and the “Opinions on Further Strengthening Mine Safety” issued by the two offices on September 6, there have been major changes in the fundamentals and expectations of the coal industry. The third quarter of 2023 is expected to be a low annual performance point, and industry profits in 2024 may increase year on year, low and high. Controlling shareholders of a number of high-quality coal companies have successively announced plans to increase their holdings, showing their confidence. High dividends in the coal sector under low capital expenditure are attractive, and with the continuous promotion of a characteristic Chinese valuation system, corporate value has received further attention from shareholders. Maintain the sector's “better than market” rating.

Three directions are recommended: 1) Bifocal elasticity. In anticipation of recovery, there is room for bifocal to rebound after experiencing a sharp drop in prices in the early period. Recommended: Lu'an Huanneng (601699.SH), Pingmei Co., Ltd. (601666.SH), Huaibei Mining (600985.SH), China Xuyang Group (01907). It is recommended to focus on: Shanxi Coking Coal (000983.SZ), Shaanxi Black Cat (), etc. 601015.SH

2) Premium dividends. High-quality companies have long-term dividend capacity, and there is room for continuous improvement in dividend rates as capital expenditure declines. Recommended: Shaanxi Coal (601225.SH), Mountain Coal International (600546.SH), China Coal Energy (601898.SH). It is recommended to focus on: China Shenhua (), Yankuang Energy (USD), and Orchid Science and Technology (). 601088.SH 600188.SH 600123.SH

3) Long-term increments. Companies that have released production capacity will be more explosive when the next cycle starts. It is recommended to focus on: Huayang Co., Ltd. (600348.SH), Haohua Energy (601101.SH), Guanghui Energy (600256.SH), etc.

Electricity consumption on the industrial side is gradually being released, and thermal coal is running at a high level. A) Price and event review: The Q5500 thermal coal price in Qinhuangdao Port fell to 922 yuan/ton this week (-1.91% YoY).

On the supply side, most coal mines in the main production areas have resumed production, and supply has increased markedly. On the Kengkou side, transportation vehicles in the mining area have returned to normal. The shipping atmosphere is average, and prices in Kengkou fluctuate narrowly according to sales. On the port side, the traditional low demand season is approaching, and the pace of warehousing is slow. Port haulage is basically based on immediate demand, and traders are not very willing to ship at low prices. On the downstream side, industrial enterprises have resumed work, and the improvement in demand for industrial electricity has led to a recovery in the daily consumption of coastal power plants. With the addition of Changxie and imported coal, terminals have no pressure to replenish stocks, and the will to increase production is average.

B) Short-term price perspective: Debon Securities judges that coal prices will still fluctuate at a high level during the peak winter season. i) “Golden Three Silver Four” non-electricity peak season: Entering the “Golden Three Silver Four”, demand for inventory replenishment in non-electricity industries such as steel and cement will gradually be released, and the basic support for electricity demand on the industrial side is expected to strengthen. ii) Continued depletion of port inventories: As of March 1, inventories at the nine ports of the Bohai Rim fell to 2225.5 tons, down 16.12% year on year; iii) Non-electricity demand is resilient: According to Mysteel data, the operating rates of the latest phase of methanol and urea were 86.18% and 83.45% respectively, which are high in the same period in history.

iv) Russian coal tariffs have been re-implemented, and import costs have risen: According to Mysteel, the Russian government decided to re-implement flexible coal export measures starting March 1. The tax rate range is set between 4% and 7%. Based on Russian coal export tariffs of 5.5%, the import cost will increase by about 5.8 US dollars. The CIF price is at the same level as domestic coal prices. Under reduced profit margins, imports may face a reduction.

C) Medium- to long-term view of prices: Debon Securities believes that the coal price center will rise further in 2024. i) Based on the total domestic output of 4.658 billion tons in 2023, an annualized calculation is based on an average monthly output of 37-40 million tons, and the 24-year production range may be between 4.4 to 4.8 billion tons. Even with 400 million tons of production, the total production growth rate is still slowing down; ii) In 2024, the Electricity and Coal Association has compliance rate requirements for both supply and demand. In the case where there is no obvious advantage in the import price difference, power plants are expected to give priority to pulling carriers to guarantee compliance, so the import volume is likely to decrease in 2024.

The peak season is approaching, and the bifocals fluctuate slightly. A) Price and event review: This week, the main coking coal price in Jingtang Port dropped slightly to 2,430 yuan/ton (-4.33% YoY). In terms of coking coal: In terms of production areas, most coal mines have resumed work and resumed production, and overall supply continues to increase. On the downstream side, due to the continuous decline in coke prices, the number of coke companies with limited production gradually increased. According to Mysteel data, the full sample capacity utilization rate of independent coke companies nationwide was 67.68%, down 2.39 pcts from month to month. Downstream mainly consumes stored coal. They are relatively cautious about purchasing raw coal, and coking companies maintain low raw material inventories.

In terms of coke: The fourth round of coke lifting and landing this week, wet coke quenching was reduced by 100 yuan/ton, and dry coke quenching was reduced by 110 yuan/ton. Losses of some coking companies have continued to expand, production limits have increased, and supply has been further tightened. On the downstream side, the peak season for steel mill profit recovery is approaching. Downstream stocks are being replenished one after another, the pressure on coking companies to ship has been relieved, and coke stocks within the factory are operating at a low level. B) Short-term view on prices: Debon Securities judges that bifocal prices are expected to operate steadily for the time being. i) Some blast furnaces have resumed production after a year. Considering the recent decline in return capacity, steel mills may be willing to continue to replenish stocks; ii) Coke and fertilizer coal increased by 200 yuan in the first quarter of 2024, coking coal increased by 150 yuan, main coking coal from mainstream mining in Pingdingshan rose 200 yuan/ton, and 1/3 of coking coal increased by 150 yuan/ton. iii) 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 the “Three Superintendents” of Coal Mines and Special Remediation of Concealed Work Surfaces” to carry out special rectification in seven major areas. The safety supervision package was knocked down, and supply contraction expectations were strengthened.

C) Medium- to long-term view of prices: Debon Securities believes that with improved macroeconomic expectations in 2024, bifocal prices are more flexible.

i) Domestic coking coal production is stable, while imports mainly come from Mongolia and Australia, but Mongolian coal customs clearance remained at an all-time high in 2023, Australian hard coking coal exports declined year on year, and subsequent growth is likely to be weak;

ii) The Customs Tariff Commission of the State Council issued a notice that from January 1, 2024, imports of coal from Indonesia, Australia and other countries will continue to maintain zero tariffs in accordance with the ASEAN Free Trade Agreement and the China-Australia FTA, and implement a 3% tariff rate on imported coking coal from other countries. As import costs rise, coking coal imports may decline in 2024;

iii) On October 24, 2023, fiscal strength increased steady growth, reflecting the country's emphasis on economic growth and contributing to the stabilization of medium-term economic growth expectations. iv) As real estate policies such as differentiated housing credit, interest rate adjustments for first home loans, and urban policies continue to be implemented and improved, demand for dual focus may rise steadily after the steady recovery of real estate and the formation of physical infrastructure volume.

This week's data review: 1) coal price and downstream price: Qinhuangdao Q5500 closing price 922 yuan/ton (-1.91%); Jingtang Port main coking coal depot price increase of 2,430 yuan/ton (-4.33%); 2) supply and demand analysis: Qinhuangdao Port railway transfer volume 457,000 tons (+41.93%), port throughput 397,000 tons (+12.78%); 3) Inventory analysis: Qinhuangdao 5145 inventory 10,000 tons, a decrease of 40,000 tons (-0.77%) from last week, steel mills Coking coal stocks are 8.07 million tons, down 383,000 tons (-4.53%) from last week; 4) International coal market: IPE Rotterdam coal price is 107.0 US dollars/ton (+5.94%), Australian peak coking coal CIF is 329.5 US dollars/ton (+0.46%), and the internal and external price difference of thermal coal is 13.68 yuan/ton, which is 56.82 yuan/ton narrower than before. The domestic and foreign price difference of main coking coal is -221.35 yuan/ton, up 120.44 yuan/ton from the previous price difference.