Futu Smart Investment learned that Haitong Securities issued a research report stating that the short-term rise in coal prices during the peak season was lower than expected, and coupled with the disturbance of mid-year performance, the overall sector experienced a volatile adjustment, but the bottom support of coal prices still exists. The logic of "steady + dividend" is still dominant. Under the circumstances that market risk appetite has not significantly improved, it is still recommended to focus on opportunities for head companies after the adjustment, and to emphasize China Shenhua Energy (601088.SH), Shaanxi Coal Industry (601225.SH), China Coal Energy (601898.SH), as well as the coal machine companies Tiandi Science & Technology (600582.SH) and Zhengzhou Coal Mining Machinery Group (601717.SH) that benefit from the coal production capacity reserve policy, the intelligent transformation of coal mines, and the Belt and Road Initiative.

The main points of Haitong Securities are as follows:

In June, coal imports increased slightly. Anglo American Resources announced that it cannot deliver goods from accident-stricken mine Q4.

SXCoal quoted the General Administration of Customs: China imported 44.6 million tons of coal in June, up 11.9%/1.8% YoY/QoQ, and accumulated 250 million tons in the first half of the year, up 12.5% YoY. From the perspective of major exporting countries around the world, Indonesia, Mongolia, Australia, and Russia exported 3.995/0.779/32.22/13.98 million tons of coal in June, up 3.3%/47.3%/-3.9%/-13.9% YoY, and down -9.1%/+7.7%/+10.9%/-3.1% MoM, respectively. Haitong Securities believes that the main reason for the MoM growth in China's import volume in June may lie in increased imports from Mongolia and Australia. It is expected that the import volume in the second half of the year will probably remain the same or decrease.

According to SXCoal, on June 29, the Grove Hill metallurgical coal mine in Queensland, Australia, owned by Anglo American Resources caught fire, and the shutdown is expected to last for several months. Recently, Anglo American Resources announced the "force majeure" for its 2024 Q4 delivery.

In addition, according to SXCoal, India is seeking to diversify its imports of coking coal to reduce its excessive reliance on Australia, and will begin importing coking coal from Mongolia later this month. Haitong Securities believes that this move may increase Mongolia's options as an export destination for coking coal, and if the trade volume and stability are significant, it may have a certain promoting effect on Mongolia's output growth.

The daily consumption of power plants first increased and then declined, and coal prices quickly rebounded and then stabilized.

As of July 12th, Qinhuangdao coal prices rebounded to 852 yuan/ton, up 12/13 yuan/ton YoY/QoQ (an increase of 1.4%/1.5%). The Yulin 5800, Ordos, and Datong 5500 kcal indexes rose by 15/11/15 yuan/ton respectively to 741/670/735 yuan/ton on a weekly basis. From July 5-11, the average daily consumption of 25 coastal and inland provincial power plants was 5.66 million tons, down 7.3% YoY (compared to 5.32 million tons and -8.4% in the previous week), and the average inventory was 129.52 million tons, up 3.5% YoY (compared to 129.34 million tons and +3.1% in the previous week). As of July 12th, the inventory of the four northern ports was 16.65 million tons, up 0.25/-0.02 million tons YoY in 2023/2022 (up 93/+0.81 million tons YoY in the previous week).

Haitong Securities believes that the high temperature continued in the first half of this week, and the daily consumption of power plants increased significantly. However, with more rain and the decline in temperature in the second half of the week, the daily consumption decreased slightly. After a rapid rebound in coal prices at the beginning of the week, the price trend has stabilized by the weekend. And with the significant output of hydroelectric power, the current daily consumption level is still lower than the same period last year. Taking into account the strong demand expectation for the peak season, it is expected that after the mid-July, the demand for replenishing inventory may gradually release, and the coal price may be volatile in the short term, but the direction of stability and upward trend remains unchanged. It is necessary to continue to pay attention to the economic recovery and the actual release of demand, as well as the impact of production volumes in the main producing areas caused by safety supervision in the future.

Steel prices and iron output have fallen slightly, and coal and coke prices are mainly stable in the short term.

As of July 12th, on the supply side, the coking plant operating rate was 74.2%, unchanged from the previous week; on the demand side, Mysteel's daily average iron output of 247 steel mills across the country was 2.38 million tons, down 0.4%/2.5% MoM/YoY (down 3% YoY in the previous week). Haitong Securities believes that last week's steel prices shook and fell slightly, and iron output fell slightly, but overall remained at a high level. After the initial round of coking coal price increases, coking enterprises' profits further improved, and their operating rates remained high. The current terminal demand is in the off-season, and iron output may continue to decline, while the supply side maintains a high level. The short-term supply and demand are generally balanced, and the price of coking coal tends to be stable.

Regarding coking coal, the Australian coking coal mine stopped production due to a fire in the previous period, resulting in a significant increase in Australian coking coal prices. It has fallen back in recent weeks, but still maintains a high level. In addition, the end terminal demand is still decent, so the short-term coking coal price remains stable. In the medium term, considering that the downstream inventory of coking coal remains at a low level, if there is a marginal improvement in demand or an event-driven factor appears on the supply side, the elasticity can be expected. In the later stage, attention should be paid to the end terminal demand of the industry chain and the steel mill replenishment progress.

Risk warning: Continue to track the impact of significantly reduced downstream demand, steady supply and price, and production restriction policies.