Intelligent Finance and Economics App has learned that Haitong Research has released a research report stating that the demand for coal in July is still significantly weaker than the same period last year, and the demand for thermal power is still declining, but the decline has narrowed. Meanwhile, the supply side has recovered slightly, and the main reason for the month-on-month decline may be the weaker demand in the peak season and the influence of extreme heavy rain. Looking ahead to August, due to the relatively high temperature and hydropower base, the demand for thermal power is expected to turn positive on a year-on-year basis, and the demand side is expected to improve marginally; the supply may maintain its current level, and further incremental space is limited. The supply-demand pattern is expected to improve marginally. From a historical perspective, the peak daily consumption may have already appeared, and it is expected that the daily consumption will start to decline as the high temperature weather gradually subsides, and downstream demand may start to actively reduce inventories. The coal price may enter a slightly downward channel.

The output in July has fallen slightly, and the supply-demand pattern is expected to improve marginally in August. (1) Output: National raw coal output in July was 390 million tons, up/down 2.8%/-3.7% year-on-year/month-on-month; cumulative output in January-July was 2.657 billion tons, down 0.8% year-on-year (compared to -1.7% in January-June). (2) Demand: In July, the output of thermal power, pig iron, and cement fell year-on-year by 4.9%, 8%, and 12.4%, respectively; the cumulative year-on-year growth rate from January to July was 0.5%, -3.7%, and -10.5% (compared to 1.7%, -3.6%, and -10% in January-June). (3) The National Bureau of Statistics announced that the industrial added value of enterprises above designated size increased by 5.1% year-on-year in July. Compared with the previous month, it increased by 0.35%. From January to July, it increased by 5.9% year-on-year.

Haitong Research believes that the demand in July is still significantly weaker than the same period last year, and the demand for thermal power is still declining due to the increase in hydropower output, but the decline has narrowed. The steel and cement industries may continue to experience expanding declines due to the weak real estate-related economy. Meanwhile, the supply side has slightly recovered. From the perspective of daily average production, the average daily output in July was 12.59 million tons, up/down 3.4%/-6.8% year-on-year/month-on-month. The main reason for the month-on-month decline may be the weaker demand in the peak season and the influence of extreme heavy rain, while the year-on-year growth may be due to the low base caused by stricter safety supervision in the same period last year. Looking ahead to August, due to the relatively high temperature and hydropower base, the demand for thermal power is expected to turn positive on a year-on-year basis, and the demand side is expected to improve marginally; the supply may maintain its current level, and further incremental space is limited. The supply-demand pattern is expected to improve marginally.

The peak daily consumption has already appeared, and it is expected that the coal price will drop slightly. (1) As of August 16, Qinhuangdao coal prices have dropped to 835 yuan/ton, down 9 yuan/ton/year-on-year and up 35 yuan/ton/month-on-month, with an increase of -1.1%/4.4%, respectively. Yulin 5800, Ordos and Datong 5500 kcal index remained at 724/662/712 yuan/ton, holding steady or dropping slightly compared to last week. (2) From August 9 to August 15, the average daily consumption of power plants in 25 coastal and inland provinces was 6.24 million tons, up 1.7% year-on-year (6.32 million tons, +3.1% in the previous week). The average inventory was 121.5 million tons, up 2.8% year-on-year (124.69 million tons, +4.3% in the previous week). (3) As of August 16, the inventory of the four northern ports was 16.23 million tons, up 108/2 million tons year-on-year (0.51 million tons, +57 in the previous week).

Haitong Research believes that the daily consumption of power plants this week has fallen slightly, and the peak daily consumption has already appeared from a historical perspective, so coal prices fell this week. As the high temperature weather gradually subsides, the daily consumption may start to decline, and the downstream may actively reduce inventories, so coal prices may enter a slightly downward channel. However, considering the recovery of non-power demand such as chemicals and the shortage of port spot resources caused by the inversion of supply and demand, coal prices may fluctuate. In the future, we still need to continue to pay attention to economic recovery and actual demand release, as well as the impact of safety supervision on production in the major production areas.

Coal and coke prices continue to fall, and may still be under pressure in the short term. (1) Output: National coke output in July was 41.58 million tons, up/down 2.7%/-0.1% year-on-year/month-on-month; cumulative output in January-July was 28.3 million tons, down 0.4% year-on-year (compared to -0.9% in January-June). (2) This week, coke prices completed the fourth round of price cuts, with a cumulative reduction of 200 yuan/ton; the main coke price at Jing-Tang Port fell by 20 yuan/ton to 1840 yuan/ton. (3) As of August 16, the operating rate of coking plants was 72.4%, down 0.5% from the previous month; on the demand side, the daily output of molten iron from 247 steel mills nationwide averaged 2.29 million tons, down 6.9% year-on-year and down 1.3% week-on-week (compared to -4.9% year-on-year in the previous week).

Haitong Research believes that affected by seasonal and the switching of old and new national standards for rebar, steel prices continued to fall this week, and the rate of decline accelerated. Steel mill losses intensified, and pig iron output accelerated its decline from a high level. Influenced by the negative feedback from the steel mills, the fourth round of coke price cuts landed, and the operating rate fell slightly. The supply and demand of coke may gradually become loose in the short term, and coupled with the weakening of cost support, the short-term coke prices may continue to be under pressure. As for coking coal, influenced by the negative feedback from the steel and coke industry, coking coal prices continued to fall this week and may still fluctuate narrowly in the short term. However, in the medium term, considering that the downstream inventory of coking coal continues to be at a low level, if demand marginally improves or if there are event-driven factors on the supply side, elasticity can be expected. In the later period, we need to pay attention to the terminal demand of the industry chain and the progress of steel mills' inventory replenishment.

Investment advice: Haitong Research believes that with the approaching off-season, downward pressure on coal prices may gradually emerge, but the bottom support for coal prices still exists. In the short term, the expectation of interest rate cuts in the United States and domestic economic pressure coexist, and the logic of coal's "steady + dividend" strategy is still dominant. In the absence of a significant improvement in market risk preference, the dividend style is expected to return.

Risk Warning: The significant decline in downstream demand, the impact of policies to maintain supply and prices and limit production require continuous monitoring.