The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that in September, the country's raw coal production recovered to 385 million tons, an increase of about 23.31 million tons over the previous month, up about 42 million tons from the low of 340 million tons in July. The stage of greatest supply contraction pressure has passed. On the demand side, thermal power generation fell 1.4% year on year in September, and the domestic electricity consumption of urban and rural residents fell 6.0% year on year. The overall performance on the demand side was relatively stable. As coal production continues to recover, the pattern of tight supply and demand in the early stages has eased marginally. In October, efforts to stabilize production and guarantee supply were further strengthened on the policy side. The National Development and Reform Commission and the National Energy Administration pushed the discontinued coal mine in Shanxi to speed up the resumption of production, compounded by the continued recovery of production in other major production areas. It is expected that there is still room for further improvement in coal supply in the future. On the demand side, winter storage and replenishment in the north forms phased support for coal prices, but it is still necessary to observe actual winter temperatures and terminal coal consumption performance. The bank believes that the core conflict in the coal market in the fourth quarter will gradually shift to a game between supply recovery and demand acceptance. As the supply and demand pattern improves marginally, the upward slope of coal prices may slow down. Follow-up attention will be paid to the continuation of demand for winter storage and the implementation of policies to increase production and supply.
Cathay Pacific Haitong's main views are as follows:
Supply side: Domestic coal production rebounded month-on-month, imports rebounded month-on-month
1) Domestically, in September, the country produced about 385 million tons of raw coal according to regulations, an increase of 6.4% over the previous month and a decrease of 6.8% over the previous year. In terms of production by province, raw coal production in Inner Mongolia, Shanxi, Shaanxi, and Xinjiang all increased month-on-month, increasing by about 594, 423, 408, and 3.23 million tons, respectively; although production in Shanxi recovered, it still fell 31.3% year on year. 2) In terms of imports, the country imported about 43.37 million tons of coal in September, up 3.0% from the previous month and down 5.7% from the previous year. By type of coal, imports of coking coal were about 13.47 million tons, up 3.0% month-on-month and 23.3% year-on-year; imports of thermal coal were about 29.9 million tons, up 3.0% month-on-month and down 14.8% year-on-year.
Demand side: demand for electricity fell month-on-month, thermal power declined month-on-month, and downstream performance of non-electricity was divided
1) On the electricity consumption side, the electricity consumption of the entire society in September was 899.7 billion kilowatt-hours, up 1.2% year on year and down 12.9% month on month. Among them, electricity consumption in the secondary and tertiary sectors increased by 1.7% and 4.9%, respectively, while the electricity consumption of residents decreased by 6.0% year on year and 35.7% month on month. 2) On the power generation side, according to the September regulations, thermal power generation decreased by 14.8% month-on-month, hydropower generation declined month-on-month, and nuclear power, wind power, and solar power generation all increased year-on-year. 3) In terms of coke steel, production of coke, pig iron and crude steel declined in September, falling 2.2%, 3.4%, and 1.4%, respectively, down 8.2%, 1.4%, and 0.1%, respectively; steel exports were 10.49 million tons, up 3.3% month-on-month and 0.2% year-on-year; in August, billet exports were 1.926 million tons, down 23.8% month-on-month and 9.2% year-on-year. 4) In terms of other non-electricity, cement production increased 11.6% month-on-month in September, and still fell 5.3% year on year; urea production fell 6.0% month-on-month, up 3.3% year on year.
Investment suggestions: Shaanxi Coal Industry, Yankuang Energy, China Shenhua, China Coal Energy are recommended; Huaibei Mining and Pingmei shares are recommended for the coking coal sector.
Risk warning: economic growth falls short of expectations; imported coal enters on a large scale; supply exceeds expectations.