Wisdom Finance APP learned that China Great Wall Securities released a research report stating that the current fundamentals of thermal coal demand remain stable, supported by electricity coal demand, while non-electricity demand, especially chemical demand, continues to recover. The bottoming out of coal prices has ended and entered a rebound channel. On the supply side, there is an expectation of shrinking coal production in Shanxi, Shaanxi, and Inner Mongolia this year. Stable production + safety will be the main production theme. The growth rate of coal supply this year will be lower than the demand growth rate, still optimistic about this year's coal price rebound.

Supply and demand price monthly data: production continues to grow, thermal power demand increases, coal prices rise month-on-month.

Supply side: The production volume of major producing areas increased significantly month-on-month. In terms of production, in September, the national raw coal production was 0.414 billion tons (up 5.5% year-on-year), from January to September, the national cumulative raw coal production was 3.48 billion tons (up 1.0% year-on-year). In September 2024, China's coal imports were 47.59 million tons (up 12.9% year-on-year). From January to September, China's cumulative coal imports were 0.389 billion tons (up 11.9% year-on-year).

Demand side: Thermal coal demand increases, good performance in chemical demand. In September 2024, national thermal power generation was 545.1 billion kilowatt hours (up 9.6% year-on-year). From January to September, national thermal power generation was 4.73 trillion kilowatt hours (up 114 billion kilowatt hours year-on-year). In September, national steel production was 0.117 billion tons (down 0.4% year-on-year). From January to September, national cumulative steel production was 1.044 billion tons (up 0.1% year-on-year).

Price side: Differentiated trends in international energy prices, widening price differences between market coal prices and long-term contract prices. In September 2024, Brent crude oil spot price was 0.266 USD/5500 kcal, down 8.0% month-on-month, down 20.9% year-on-year. Qinhuangdao Port 5500 kcal thermal coal price was 0.121 USD/5500 kcal, up 2.3% month-on-month, down 5.9% year-on-year. Qinhuangdao Port 5500 kcal thermal coal long-term contract price was 697 RMB/ton, down 2 RMB/ton month-on-month, with a 156 RMB/ton difference between market price and long-term contract price, reduced by 14 RMB/ton compared to August.

September coal market trends: terminal inventory replenishment demand support, downstream market sentiment relatively positive

From the perspective of production areas, under the spread of upward momentum in the port market, market sentiment is gradually improving. Combined with stable release of civil and non-electricity demand, most coal mines have improved sales, inventory continues to decrease, supporting prices to gradually rise. In terms of ports, due to the relatively high temperatures in the southern region and the decrease in hydropower output, the number of available fuel days for downstream power plants has decreased significantly, leading to successive releases of restocking demand. However, port available goods are relatively tight, coupled with continued backward shipping costs, hence sellers have a clear stance to hold prices up, resulting in continuous price increases.

In September, the coal secondary market performance: the coal industry outperformed the large cap.

As of September 30, the Shenwan Coal primary industry index rose by 14.65%, underperforming the large cap index by 2.74 percentage points. The three companies in the coal sector with better performance are Henan Dayou Energy (+30.08%), Anyuan Coal Industry Group (+25.67%), Shanghai Datun Energy Resources (+25.53%).

Regarding Symbol.

China Great Wall Securities believes that under the current policy emphasis on safety production, there is an expectation of supply contraction in the coal supply sector. The sector has high cash and high dividend attributes, with profitability maintaining stability. Recommendations include: 1) Leading State-owned enterprises in the industry with strong performance prospects, recommended are China Shenhua Energy (601088.SH), China Coal Energy (601898.SH), Shaanxi Coal Industry (601225.SH). 2) With downstream demand gradually recovering, bullish on future coking coal price increase space, recommending Huaibei Mining Holdings (600985.SH), Pingdingshan Tianan Coal Mining (601666.SH). 3) Integrated operation of upstream and downstream businesses, strong stability against cyclic fluctuations, recommending China Coal Xinji Energy (601918.SH), Anhui Hengyuan Coal Industry and Electricity Power (600971.SH). 4) Beneficiaries from Xinjiang coal exports, recommended is Guanghui Energy (600256.SH).

Risk warning: downstream demand falling short of expectations, major safety production accidents in key coal mines, systemic decline in international energy prices, occurrence of international geopolitical crises.