The Zhitong Finance App learned that Haitong International released a research report saying that the daily consumption of power plants increased sharply from month to month last week, but the national temperature was warmer than the same period, so the increase was limited. However, as the temperature gradually drops, demand is about to enter a peak in coal use, compounding the increase in imported coal price differences. It is expected that thermal coal prices will fluctuate in the short term but there may be limited room for decline. In the future, we still need to continue to pay attention to economic recovery and the actual release of demand driven by macroeconomic policies. Looking ahead to the future market, the dust of the US election has settled, domestic fiscal policy is in line with expectations, the fundamentals of the coal industry are steady, coal prices are expected to rise steadily at the beginning of the short-term peak season, and the mid-term price center is still expected to remain high. The undervaluation and high dividend characteristics of coal companies are remarkable, and we will continue to pay attention to the long-term value of high-performing companies.

Haitong International's main views are as follows:

Production returned to near the historical peak in October, and both supply and demand are expected to be strong in the future during the year

Production: In October, the country's raw coal production was 0.412 billion tons, +4.6%/-0.6% month-on-month; the cumulative output in January-October was 3.892 billion tons, +1.2% year-on-year (0.6% in January-September). Demand: Thermal power/pig iron/cement production +1.8%/+1.4%/-7.9% YoY in October; cumulative YoY +1.9%/-4%/-10.3% YoY in January-October (+1.9%/-4.6%/-10.7% in January-September). National Bureau of Statistics: The value added of industries above the scale of October actually increased by 5.3% year-on-year and increased by 0.41% month-on-month; in January-October, +5.8% year-on-year (5.8% in January-September). Ministry of Finance: On the 13th, the State Administration of Taxation and the Ministry of Housing and Construction jointly issued the “Notice on Tax Policies to Promote the Stable and Healthy Development of the Real Estate Market”, which clarifies various preferential tax policies to support the development of the real estate market, such as deeds tax and value-added tax.

Haitong International believes that the supply side has now recovered to near the historical peak level, and production is unlikely to increase further in November and December. On the demand side, steel and cement improved significantly in October, mainly due to seasonal and policy factors. With the arrival of the peak winter season, thermal power will also maintain high growth, and overall supply and demand are expected to be strong.

The daily consumption of power plants has increased dramatically and the inversion of imports has increased, and port coal prices are expected to rise steadily

As of November 15, the price of coal in Qingang was 837 yuan/ton, compared to -10/-99 yuan/ton year-on-year (increase of -1.2%/-10.6%). The Yulin 5800, Ordos and Datong 5500 kcal indices were +5/-4/-5 yuan/ton compared to 730/655/712 yuan/ton from week to week. On November 8-14, the average daily consumption of power plants in the 25 coastal and inland provinces was 5.4 million tons, +1.4% over the same period (5.09 million tons and -0.4% in the previous week, respectively); the average inventory was 135.47 million tons, +5% over the same period (133.13 million tons and +3.3% in the previous week, respectively). As of November 15, the four northern ports had stocks of 18.11 million tons, compared with +48/+5.04 million tons for the same period in 23/22 (-69/+5.63 million tons year-on-year in the previous week).

Haitong International believes that the daily consumption of power plants increased sharply from month to month last week, but the national temperature was warmer than during the same period, so the increase was limited. However, as the temperature gradually drops, demand is about to enter a peak in coal use, compounded by an increase in the price difference of imported coal. It is expected that although thermal coal prices fluctuate in the short term, there may be limited room for decline. In the future, we still need to continue to pay attention to economic recovery and the actual release of demand driven by macroeconomic policies. Pay attention to the impact of safety supervision on production in major production areas.

Steel prices continued to decline in the off-season. Bifocal may maintain a fluctuating downward trend, but it is difficult to fall deeply

Production: In October, the country's coke production was 41.2 million tons, -0.9%/+4.8% month-on-month; cumulative production in January-September was 0.406 billion tons, -1.1% YoY (-1.2% in January-September). As of November 15, the second round of price reduction for coke has been implemented, with a cumulative reduction of about 100 yuan/ton. Currently, the third round of increases and decreases has begun; the price of coking coal has stabilized for the time being. As of November 15, on the supply side, the operating rate of coking plants was 72.5%, -0.4 pct; on the demand side, Mysteel's 247 steel mills nationwide produced an average daily iron and water production of 2.36 million tons, +0.8%/+0.2% week over week (-2% compared to the previous week).

Haitong International believes that at present, downstream demand for coal, coke and steel is entering a low season, and steel prices continue to decline, but overall iron and water production is stable, and there is still support for immediate demand. Considering the contraction in profits of steel mills, it is expected that three rounds of coke price cuts will be implemented, but there is little chance of a further deep decline. In terms of coking coal, due to the slowdown in downstream procurement and relatively sufficient production and supply, the price of coking coal continues to be weak and stable, and may still fluctuate in a narrow range in the short term. However, in the medium term, considering that downstream coking coal stocks continue to be low, if marginal demand improves or eventual supply-side flexibility occurs, we need to pay attention to the demand situation of industrial chain terminals and the progress of steel mill replenishment in the later stages.

Related targets: (1) China Coal Energy, which can be expected to improve operating and dividend margins, China Shenhua (601898.SH), Shaanxi Coal (601225.SH); (2) Electric Investment Energy (002128.SZ), Xinji Energy (601918.SH), and Mountain Coal International (), which benefits from the implementation of smart coal production capacity reserve policies and is expected to continue growing over 25 years; (3) Huaibei Mining (DAB), which benefits from the implementation of smart coal production capacity reserve policies and coal mine safety 600546.SH 600985.SH Coal machinery companies Tiandi Technology (600582.SH) and Zheng Coal Machinery (601717.SH), which are involved in chemical transformation and the “Belt and Road” initiative.

Risk warning: The impact of the sharp decline in downstream demand, stable supply and price, and production limit policies needs to be continuously tracked.