Coking coal prices may have bottomed out in April
The Zhitong Finance App learned that the Port of Baltimore is the second-largest coal transportation hub in the US. The continued closure of the port prompted the US Energy Information Administration (EIA) to lower US coal export forecasts for April and May by 33% and 20%, respectively, on Tuesday.
In response to the domestic situation, Guotai Junan believes that in the “coking and steel industry chain,” the price fluctuation trend of coking coal and coke is consistent, and there is an inverse relationship between steel bargaining power and profitability.
Guotai Junan observed that through eight rounds of consecutive declines in coke prices at the beginning of the year (coking coal prices followed), the steel industry's profit per ton of steel had recovered to an average of 200 yuan/ton in 2023, rebounding from a situation where the entire industry lost money to profit. Judging that in the context of profit recovery, the momentum for continuing to reduce coke prices was not strong; furthermore, coking companies have lost money throughout the industry and are fully limited in price. It is expected that the price has basically reached the end.
CITIC Securities released an outlook on the results of the coal industry for the first quarter of '24, indicating that coal prices are still falling slightly recently, and downstream demand has not improved significantly, but market pessimism is gradually easing. The year-on-year decline in quarterly reports is expected, and the sector is gradually absorbing the impact of performance expectations.
In the medium term, safety inspections may continue to restrict coal supply, helping keep average coal price expectations high throughout the year. Considering the expectation that demand will gradually stabilize in the middle of the second quarter, compounded by factors such as the return of the dividend theme and the expected general rise in commodity prices, the sector may pick up in the midst of shocks and gradually launch a new round of market conditions.
Companies related to the coal sector:
Yankuang Energy (01171), Yancoal Australia (03668), China Shenhua (01088), China Coal Energy (01898), Yitai Coal (03948), China Qinfa (00866)