The Zhitong Finance App learned that Guojin Securities released a research report saying that fluctuations in coal prices at the 1-2 M24 port were more affected by the supply side. On the supply side, supply contracted year on year, and ports also showed fluctuating changes in storage first and then storage due to changes in turnover conditions. However, on the demand side, with the addition of Changxie Coal and imported coal, terminals have not seen concentrated, large-scale coal purchases in the port market. Taken together, changes in port inventories caused by supply changes around the Spring Festival are the main reason for the phased rise in coal prices after the holiday season. The market looks forward to a limited increase in coal prices in the port market in May after being pressured and lowered during the off-season in March-April. Judging from the 1-2 M24 coal price fluctuation experience, whether the port can successfully go to storage is an important condition for whether market coal prices can recover after the off-season.

The main views of Guojin Securities are as follows:

Supply side - domestic production: coal production declined year-on-year in January-February '24. Overall, the average daily production of 1-2 M24 raw coal was 11.755 million tons, down 690,000 tons and 1.61 million tons from year to month, respectively; the cumulative thermal coal production of 1-2 M24 was 590 million tons, down 3.0% year on year. Since February, coal supply has been limited by the “three super” measures of coal mines in the Shanxi region. Combined with the blizzard and extremely cold weather before the Spring Festival, land transportation was blocked. This year, traders had a Spring Festival holiday of 1 day longer than last year, and national safety inspections were tightened closer to the two sessions. Multiple restrictions combined to drive the phased contraction of coal supply in production areas.

Supply side - port turnover: During the Spring Festival, the return to storage spurred a rise in coal prices, and after the holiday, the port accumulated stocks again to limit the further rise in coal prices. At the beginning of 2024, coal prices in the main production areas fell steadily, moderately, and the enthusiasm of traders to ship to the port gradually declined. Along with factors such as extreme weather hindering land transportation and long work stoppages during the Spring Festival, port transfers declined rapidly and were removed from storage. In particular, stocks at the Bohai Rim Port fell by nearly 7% from February 9 to 17. The mining area resumed production and coal production and supply after the holiday season. Combined, windy and foggy weather caused port closures and outbound transportation to a certain extent, and the port regained storage capacity.

Demand side: In January-February, thermal coal consumption was +8.5%, with electricity and coal consumption +9%, and the non-electricity sector consumed thermal coal +7.6%. However, due to abundant supplies of Changxie coal and imported coal, terminal power plant inventories remained at a high level for 18-20 days, and overall demand for coal in the port market was weak.

Looking at overall supply and demand, fluctuations in coal prices at the 1-2 M24 port are more affected by the supply side. On the supply side, supply contracted year on year, and ports also showed fluctuating changes in storage first and then storage due to changes in turnover conditions. However, on the demand side, with the addition of Changxie Coal and imported coal, terminals have not seen concentrated, large-scale coal purchases in the port market. Taken together, changes in port inventories caused by supply changes around the Spring Festival are the main reason for the phased rise in coal prices after the holiday season.

The market looks forward to a limited increase in coal prices in the port market in May after being pressured and lowered during the off-season in March-April. Judging from the 1-2 M24 coal price fluctuation experience, whether the port can successfully go to storage is an important condition for whether market coal prices can recover after the off-season.

On the supply side, multiple and short factors coexist. On the one hand, with the introduction of the Shanxi insurance policy, the impact of domestic producer-side safety supervision is expected to narrow, and on the other hand, the increase in coal imports will continue to narrow due to price inversion. Looking at multiple and short factors, coal supply is expected to remain basically stable month-on-month in May.

On the demand side, demand for heating shrunk in March-April, electricity and coal consumption entered the traditional low season, and real estate and infrastructure were still being adjusted at the bottom. As a result, the recovery of the non-electricity sector was slow, so port storage and coal prices were lowered; it is expected that downstream power plants peak in May, demand for coal storage and preparation before summer will stimulate port storage and boost coal prices.

However, there are still limiting factors, so the magnitude of port depots and coal prices bottoming out in May is not expected to be significant: supply-side restrictions mainly involve the early completion of the Daqin Railway maintenance at the end of April, the end of Shanxi's “Three Super” controls in May, lowering freight rates or stimulating coal shipments, and international coal supply is expected to increase sequentially after Indonesia's end of Ramadan in mid-late April; demand-side restrictions mainly relate to the current high coal storage in downstream power plants, and there is no obvious pressure to replenish stocks in May.

The general pattern of loose thermal coal supply and demand has not changed in 24, and the coal price center is expected to continue to decline, driving the continuous improvement of thermal power profitability. Recommended attention: ① Power generation assets are mainly distributed among thermal power companies in regions with tight electricity supply and demand and good competition patterns on the power generation side, such as Zhejiang Electric Power (600023.SH), Anhui Energy (000543.SZ), and Huadian International (600027.SH); ② thermal power companies with power generation assets in the Midwest and fuel procurement mainly based on Kengkou coal, such as Construction Investment Energy (000600.SZ) and Datang Power Generation (601991.SH).

Risk warning

The new installed capacity fell short of expectations; the decline in coal prices fell short of expectations; the number of hours used fell short of expectations due to poor downstream demand and reduced demand for electricity.