Recently, the National Development and Reform Commission issued a notice to further improve the coal market price formation mechanism, pointing out that coal is an important product related to the national economy and people’s livelihood. On the basis of insisting that coal prices are formed by the market, we propose a reasonable range of coal prices, improve the control mechanism, strengthen range control, guide coal prices to operate within a reasonable range, and promote the effective transmission of coal and electricity prices through market-based methods.
The “Notice” clarifies three key policy measures:
One is to guide coal prices to operate within a reasonable range. Judging from the market operation for many years, the mid-to-long-term transaction price of Qinhuangdao Port’s off-water coal (5,500 kcal) in the near term is reasonable at 570-770 yuan per ton (tax included), and the upstream and downstream can achieve better coordinated development. Considering factors such as reasonable circulation costs, production costs, etc., the reasonable range of medium and long-term transaction prices in the mining process in key coal-transferring areas (Shanxi, Shaanxi, and Mongolian provinces) has been clarified accordingly. The National Development and Reform Commission and relevant parties have taken comprehensive measures to guide coal prices to operate within a reasonable range.
The second is to improve the coal and electricity price transmission mechanism.Guiding coal and electricity prices are mainly formed through medium and long-term transactions. When the medium and long-term coal transaction prices operate within a reasonable range, coal-fired power generation enterprises can fully transmit changes in fuel costs through market-oriented methods under the current mechanism, and encourage medium and long-term electricity transactions.contractIn order to effectively realize the transmission of coal and electricity prices, the terms of linking the on-grid electricity price with the medium and long-term transaction price of coal should be reasonably set.
The third is to improve the coal price control mechanism. First, improve the ability to adjust supply and demand. Ensure reasonable and sufficient coal production capacity, improve the medium and long-term coal contract system, further enhance the government’s dispatchable coal storage capacity, and improve the reserve adjustment mechanism. Second, strengthen the management of market expectations. Improve the cost investigation and price monitoring system, standardize the compilation and release of coal price index. When the coal price exceeds the reasonable range, the means and measures stipulated by the “Price Law” and other laws and regulations shall be fully used to guide the coal price to return. Third, strengthen market supervision. It is strictly forbidden to improperly intervene in the prices of coal and electricity operating within a reasonable range, strengthen the supervision of the performance of medium and long-term contracts for coal and electricity, strengthen the joint supervision and anti-monopoly supervision of the futures and spot markets, and promptly investigate and deal with price violations.
The long-term price range is more clear, and the industry is expected to maintain a high level of profitability. The notice clearly pointed out that the current long-term association price level (Qingang 5500 kcal price is 570-770 yuan / ton) is reasonable. The price was raised from 535 yuan to 670 yuan, an increase of 25% (or +135 yuan), with a fluctuation of 100 yuan up and down; the price center in the previous consultation draft was 700 yuan, with a fluctuation of 150 yuan up and down, and the final price mechanism was compared with that of soliciting opinions. The price center in the draft is lowered by 30 yuan, and the fluctuation range is reduced by 50 yuan each. If the future long-term association price is limited to this range, the profitability of coal companies will be significantly improved compared with 2017-2020. From the historical long-term association price, the average long-term association price in 2017-2020 is about 550-560 yuan / ton , the fluctuation is small. Under the circumstance that the coal price fluctuates greatly in 2021, the long-term cooperation price will reach a maximum of 754 yuan / ton, the annual average price is 648 yuan / ton, and the recent long-term cooperation price is 725 yuan / ton, basically falling. Within the guidance range, based on the new pricing method, the long-term agreement price in February is about 738 yuan/ton, which is still slightly higher than the current price. If the average price of the long-term coalition in 2022 falls in the center of the guidance range (670 yuan/ton), the profit of the long-term coal mine will even be higher than that in 2021, and the industry as a whole is expected to maintain a high level of profitability.
Investment strategy: With the release of this “Notice”, the sustainability of high profitability of coal companies will be gradually verified, and the concerns of profitability uncertainty will be relieved.coal industryInvestment Opportunities.In terms of individual stock recommendations, companies with a high proportion of long-term associationsperformanceCompanies with more stable growth and a high proportion of coal in the market have more attractive valuations. Companies with large coal type advantages or production growth logic have a strong alpha attribute. In addition, coal stocks that actively deploy energy transformation will also receive a higher valuation. Opportunity. Thermal coal stocks are recommended to pay attention to:Jinkong Coal Industry、Shaanxi Coal Industry、Yankuang Energy、China Shenhua、China Coal Energy、Power Investment Energy、Haohua Energy. Metallurgical coal stocks are recommended to pay attention to:Lu’an Environmental Energy、Pingmei Co., Ltd.、Shanxi Coking Coal、Huaibei Mining、Jizhong Energy、Shanxi Coking. Anthracite recommended attention:Orchid Science and Technology. Coke stocks are recommended to pay attention to:Meijin Energy、Jinneng Technology、China Risun Group、Kailuan Co., Ltd.、Shaanxi black cat。
Risk warning: Economic growth rate is lower than expected; policy regulation is too strong; renewable energy substitution, etc.; coal imports affect risks.
(Article Source:Zhongtai Securities）