The Zhitong Finance App learned that on September 29, most of Hong Kong coal stocks strengthened today. By the close, Yancoal Australia (03668) rose 5.78%, Mongolian coking coal (00975) rose nearly 4%, and China Coal Energy (01898), China Shenhua (01088), and Yankuang Energy (01171) all rose to varying degrees. According to the news, it was reported that the Nord Stream gas pipeline system was damaged. Currently, this is the first time that the three branch lines of the pipeline have been damaged at the same time, and it is impossible to predict when gas supply will be restored. Affected by this, British gas futures rose more than 33% on Tuesday, and mainland European gas benchmark futures also rose more than 21%. Open Source Securities previously stated that the Nord Stream Pipeline will be suspended indefinitely, and alternative demand will provide upward momentum for coal prices. Europe is expected to reduce natural gas demand for additional coal (5,500 kcal) by about 22.07 million tons from September to December 2022, and will increase coal demand by 66 million tons in 2023. There may still be a mismatch between supply and demand in coal fundamentals in the future. Combined with the intensification of the energy crisis, the supply gap for alternative demand may still give upward momentum to coal prices.

In terms of domestic news, according to CCTV news, in order to lay a good foundation for the upcoming coal winter season, the Daqin Railway will begin a 25-day centralized maintenance period starting today (September 28). The Daqin Railway runs from Datong in Shanxi in the west to Qinhuangdao in Hebei in the east, and runs through Shanxi, Hebei, Beijing and Tianjin, with a total length of 653 kilometers. Since national railways launched a special operation to guarantee the supply of electricity and coal in June of this year, the traffic volume of the Daqin Line has exceeded 120 million tons, an increase of 10.2% over the previous year, setting a record for the same period since the line was built. Meanwhile, the National Development and Reform Commission said a few days ago that the country will strengthen the construction of energy security and supply infrastructure and will build five major coal supply guarantee bases in Shanxi, Mengxi, Mengdong, northern Shaanxi, and Xinjiang.

The Taiyuan Municipal People's Government Office recently issued a notice on issuing Taiyuan's work plan to increase coal production and supply and increase production capacity. It mentions that, on the basis of production safety, every effort is made to tap the production potential of coal mines, increase production capacity in an orderly manner, speed up the processing of coal mine procedures, and take multiple measures to enhance the ability to guarantee coal supply. Production reached 48 million tons in 2022, aiming to reach 48.5 million tons. Production will aim to reach 50 million tons in 2023. Strictly implement the production stoppage reporting system, and it is strictly prohibited to take “one-size-fits-all” shutdown measures in the coal mine area where the accident occurred. In 2022, two coal mines will be completed and put into trial operation, releasing 2.1 million tons/year of advanced coal production capacity.

Furthermore, the Energy Administration of the Inner Mongolia Autonomous Region issued the “Inner Mongolia Autonomous Region's Implementation Plan on Energy Security and Supply Under the Carbon Peak Target” and the “Inner Mongolia Autonomous Region's Implementation Opinions on Improving the Institutional Mechanism and Policy Measures for the Green and Low-Carbon Energy Transformation”. It states that coal storage capacity will continue to be strengthened and the flexibility of coal supply will be enhanced.

In terms of overseas news, the Danish Energy Agency confirmed that the “Nord Stream-2” pipeline discovered a leak point in the waters near Denmark on September 26, and the “Nord Stream-1” pipeline discovered two more leaks on the 27th. They occurred in the northeastern and southeastern parts of Bornholm, respectively. The operator of Russia's “Nord Stream-1” project, the North Stream Gas Pipeline Company, issued a statement on the 27th saying that the three pipelines of the “Nord Stream-1” and “Nord Stream-2” submarine gas pipelines were damaged at the same time in a day, and it is currently impossible to assess the maintenance time. As Europe's energy crisis intensifies, European countries scramble to find alternative supply solutions for Russian coal and gas. The International Energy Agency predicts that total global coal sales will reach 8 billion tons in 2022, returning to the all-time high set in 2013.

Europe consumes about 480 billion cubic meters of natural gas every year, of which Russia transports about 187.5 billion cubic meters of natural gas to Europe through gas pipelines every year. Currently, transportation capacity has dropped by about 925 billion cubic meters. Even if 35 billion cubic meters of LNG and natural gas were imported from other countries this year, the EU gas supply gap in 2023 would be around 67.5 billion cubic meters. It would roughly require a 203% increase in EU coal (Africa and Russia) imports, or nearly 450 times the current oil consumption. Procurement is difficult, and application scenarios are not interoperable. According to data, the EU imports about 45% of coal from Russia every year, with a total value of about 4 billion euros, and about 70% of the thermal coal used for power generation and heating comes from Russia. Furthermore, Russia is one of the world's top three coal exporters.

Open Source Securities previously stated that the Nord Stream Pipeline will be suspended indefinitely, and alternative demand will provide upward momentum for coal prices. Europe is expected to reduce natural gas demand for additional coal (5,500 kcal) by about 22.07 million tons from September to December 2022, and will increase coal demand by 66 million tons in 2023. There may still be a mismatch between supply and demand in coal fundamentals in the future. Combined with the intensification of the energy crisis, the supply gap for alternative demand may still give upward momentum to coal prices.

According to the September 29 research report of Guohai Securities, the tight coal supply is heating up, and the price of thermal coal in the thermal coal market has rebounded rapidly. The increase in the share of coal in Changxie will benefit the supply and demand relationship in the coal market in the long run, but in the short term it will cause the supply of coal in the market to shrink, forming strong support for market prices. A lot of increased coal production capacity has been released, and supply elasticity is weak in the short term. The industry is expected to maintain a high level of prosperity and maintain the industry's “recommended” rating.

Haitong Securities also said that market fluctuations have intensified, the coal sector's undervaluation and high dividend advantages have been highlighted, and the valuation increase logic driven by an upward shift in the mid-term performance center has not changed. We recommend transforming energy storage leaders for sodium batteries; opportunities in the coking coal sector driven by marginal improvements in the black industry chain; equipment companies such as coal machines that benefit from increased fixed asset investment in the industry; and companies with stable and high dividends.

Related concept stocks:

Yancoal Australia (03668): The company is the largest producer of pure coal in Australia. Yancoal operates five mines and manages five others in New South Wales, Queensland and Western Australia, and also accounts for around 50% of the Middlemount joint venture. Yancoal currently has around 5,500 employees, most of whom come from the local communities where it operates.

China Coal Energy (01898): The largest coal producer in East China and one of China's largest coal exporters. Major Australian coal producers expect a year-on-year increase of 62.8% to 79.9% in the first half of 2022.

China Shenhua (01088): The company's main business is the production and sale of coal and electricity, railway and port transportation, shipping business, and coal-to-olefin business. The company is actively promoting preliminary work in the Xinjie mining area and individual mines, with a view to starting construction of the first well and second wells in Xinjie as soon as possible.

Yankuang Energy (01171): The company currently has a total coal equity production capacity of 143 million tons/year, with domestic equity production capacity of 79.17 million tons/year and overseas production capacity of 64.08 million tons/year. Of these, the production capacity of the Wanfu mine is only one pair under construction, with a production capacity of 1.8 million tons/year. It is expected to be put into operation in 2024.