The Zhitong Finance App learned that Guotai Junan released a research report saying that the price of thermal coal continues to fall, with the bottom looking at more than 800 yuan/ton; the price of coking coal may have reached the bottom, and there is a possibility of a “V” reversal in 2024; there is no need to be pessimistic about real estate; the Zhengzhou New Deal may become an important new policy policy. The restructuring of the coal sector's valuation is underway. The reaction behind it is not only profound changes in the coal industry's supply and demand structure, gradual “utilitization,” but also reflects the problem of scarce high-dividend asset investment strategies under the downward trend in risk-free returns.

Guotai Junan's views are as follows:

Thermal coal: the price continues to decline, looking at 800 yuan/ton or more at the bottom

At the beginning of April, due to continued weakness in downstream demand, thermal coal prices continued to plummet, falling back to around 830 yuan/ton. Although the Daqin Line began maintenance in April, and Shanxi carried out a special investigation and rectification of hidden disaster factors in coal mines, overall supply is expected to shrink slightly in April. According to Guotai Junan's judgment, demand in April will recover somewhat compared to March, and supply and demand are expected to stabilize even more in April. However, prices may continue to fall in the short term. The bottom is expected to occur from mid-April to late April. The price bottom still maintains the January view, “the bottom of 800 yuan/ton.”

Coking coal: the price has reached the bottom, and there is a possibility of a “V” reversal in 2024

After experiencing 7 rounds of price cuts, the profits of independent coking companies across the country according to MySteel have dropped to -155 yuan/ton. Many companies have been forced to limit production by smoldering, and the resistance to continued steel price cuts is strong. It is expected that coke prices will basically reach the bottom. Guotai Junan believes that in March, when fundamental pressure is greatest, iron and water production remained at the level of 2.2 million tons/day against the backdrop of extreme infrastructure+real estate demand.

Looking back at the demand background where the price of coking coal rose to 2,500 yuan/ton in '23, the production of molten iron was 24.0-2.5 million tons, which is about 10% higher than the current worst demand level. What is different about the supply side in 2024 is that there was a definitive decrease on the supply side. In January-February, raw coal production in Shanxi fell 18% year on year, or 38 million tons; in January-February, the production of fine coking coal decreased by 7 million tons year on year, a decrease of 9%, which also reflects the fact that production was reduced due to the influence of the Xi'an monitoring in Shanxi.

Industry review:

1) As of April 5, 2024, Qinhuangdao Port's inventory was 5.27 million tons (-7.9%). The price increase of the main coking coal depot in Jingtang Port was 1,930 yuan/ton (-1.5%), the port grade coke was 2,132 yuan/ton (-2.5%), and the total coking coal stocks in the three ports were 2,074 million tons (-4.5%). The operating rate of coking companies above 2 million tons was 69.16% (-0.70PCT). 2) The FOB price of Q5500 at Newcastle Port in Australia fell by 2 US dollars/ton (-2.2%), the cost of sewage coal from North Port (Q5500) was 665 yuan/ton higher than imported Australian coal; the CIF price of Australian coking coal was 256 US dollars/ton, down 7 US dollars/ton (-2.5%) from last week. The main coking coal produced in Jingtang Port in Shanxi was 190 yuan/ton lower than imported hard coking coal from Australia.

Risk warning: macroeconomic growth falls short of expectations; imported coal enters on a large scale; supply exceeds expectations and is released.