SHANGHAI, Aug 9 (SMM) - The coal sector posted strong gains today. As of 13:45 Beijing time, the coal sector rose by 3.56%.
On the news front, in April 2022, the EU officially approved the fifth round of sanctions against Russia, including a coal ban with a 120-day transition period, which is expected to take effect on August 10, 2022.
In terms of China, the European ban on Russian coal in August may bring about a global coal trade gap of about 3%, making it more difficult for China to import coal. Coal supply is expected to tighten in the second half of the year. It is expected that the coal price will usher in an upward track from August to September, and then the correct due to the staged surplus. However, there is a large supply deficit of 31.73 million mt in December in winter, which will bring about a significant increase by then.
Meanwhile, the International Energy Agency (IEA) predicted in July that coal consumption by the European Union member countries will rise 7% in 2022 on top of the growth of 7% in 2021, and global coal consumption will added 0.7% year-on-year to 8 billion mt, close to the all-time high set in 2013. The institute also expects a further increase in global coal demand in 2023.
In addition, recently, the State Administration of Market Supervision organised three investigation teams to conduct investigations in Shanxi, Inner Mongolia and Shaanxi provinces respectively, to further strengthen the supervision of thermal coal prices, clarify the red lines, and regulate the order of thermal coal prices. The administration will continue to strengthen coal price supervision, focus on exposing typical cases, and guide coal prices to operate within a reasonable range.
Institutional opinions:
Guotai Jun’an Securities: There is room for a substantial increase in valuation under lasting high coal prices
The cumulative decline in coal imports from January to July has expanded, and it is expected that coal imports may further decline in August. The European ban on Russian coal will take effect soon, and overseas coal prices may rise again. Thermal coal demand remains high, and the coking coal demand will bottom out. Investors are advised on trade "global supply" + "domestic demand". The fundamentals of the industry are strong and will remain strong, and the sector's profitability is stable with extremely low valuation; while the dividend is considerable. There is room for a substantial increase in valuation under lasting high coal prices.
Haitong Securities: To pay attention to coal machinery and other equipment companies that benefit from the increase in fixed asset investment in the industry
We believe that the target of ensuring coal supply and stabilising prices is still the priority in the second half of the year, and the core lies in the strict supervision of the performance of medium and long-term thermal coal contracts, thus raising the agreement fulfilment rate. In addition, the supervision over coal prices has also been significantly increased, in order to further ensure that the price of thermal coal remains within the reasonable range. The fall in coal prices in the peak season and the influence of policy regulation have intensified short-term sector fluctuations, but the logic of valuation improvement driven by the upward shift of the mid-term performance remains unchanged.
Capital Securities: Global coal demand has regained its upward momentum, and many countries have introduced policies to ensure domestic demand
Global coal demand has resumed its upward momentum, and many countries have introduced policies to ensure domestic demand. According to the July Coal Market Report released by the International Energy Agency, global coal consumption will rise slightly in 2022. In 2021, global coal consumption rebounded by about 6%. The IEA expects this figure to increase by 0.7% this year, reaching 8 billion mt, matching the record set in 2013. The Ministry of Coal India reported on July 27 that in order to meet the domestic demand for coking coal, the Indian government has launched the "Coking Coal Mission", which aims to produce 140 million mt of coking coal by fiscal year 2030. Indian media reported that Indian Steel Management has ordered 80,000 mt of Russian coking coal, which is expected to arrive at a port in eastern India in the next few weeks. Kazakhstan has made plans to prevent a hike in the price of coal for public and household needs. The country is expected to consume about 9.6 million mt of coal this year, of which 2.6 million mt will be used by the utility sector and 7 million mt will be sold to the public. In addition, Australia has raised coal tariffs to restrict exports; China has implemented zero tariffs to encourage coal imports; the EU coal import gap needs to be filled urgently. All in all, the global coal supply shortage has tightened.
