The Night Before The Great Change: Coal Industry Concentration Will Be Enhanced Again

Recently, China coal market network official issued a document, in view of the recent continuous abnormal fluctuations in the steam coal market, in order to stabilize the coal market price, after research, suspended the release of "cctd Bohai Rim steam coal spot reference price.". According to the previously published price, as of May 14, cctd Qinhuangdao steam coal comprehensive trading price (q5500) was 751 yuan / ton, up 35 yuan / ton weekly. So far, in May 2021, China's long-term coal price (q5500) is 596 yuan / ton, with a monthly increase of 27 yuan / ton.

"At present, the main factors affecting the price of the coal industry are the supply and demand situation. The supply side is mainly affected by the policy, and the demand side is mainly affected by the climate and the prosperity of downstream industries." On May 18, a Beijing securities industry researcher analyzed the 21st century economic report that since 2021, the supply and demand situation has been tense, leading to the rise of coal prices. However, Zhou Tai team, an analyst at Anxin Securities Research Institute, analyzed in its research report that due to the supply guarantee task from January to February and the low base number in the same period last year, there was not much room for the actual production of raw coal (the growth rate of raw coal production in March was - 0.3%). However, the demand side of hydropower is obviously insufficient, and the downstream production of thermal power, cement and other downstream industries has increased significantly. Coal prices will continue to exceed expectations in 2021.

Coal prices rise

This year's coal price trend has appeared "deep V" trend. Before the Spring Festival, the price of steam coal and coking coal reached the stage high point. During the Spring Festival, the price dropped. However, the resumption of work and production after the Spring Festival and the rising demand side made the coal price rise again, which has been rising up to now.

As of May 14, the average price of coal in May was 899.13 yuan / ton, a year-on-year increase of 23.22%.

Among them, in terms of steam coal, the average price of 5500 kcal in Qinhuangdao port in April was 759.14 yuan / ton, with a year-on-year increase of 56.67%, an increase of 22.45% compared with that in 2019, and a two-year compound growth rate (CAGR) of 10.66%. In terms of supply, the above-mentioned Beijing researchers pointed out that due to the influence of early safety accidents, the safety inspection of production areas is generally more strict, and the superposition of environmental protection inspection has led to the continuous tight supply of production areas due to the shutdown and production restriction of some coal. In terms of demand, China's economy continues to rise, and the downstream industrial power and coal demand is good. The inventory of Qinhuangdao port is affected by the overhaul of Daqin line, which is lower than that in previous years. At present, the peak of power consumption in summer is coming, and the demand for replenishment of downstream power plants supports the high coal price, and the situation of shortage of steam coal is expected to continue.

In terms of coking coal supply, Shanxi environmental protection inspection is more strict in the early stage, but the recent strength has been weakened. Some coal mines have increased production, but the raw coal supply is still relatively tight. According to the above researchers, China will stop the import of Australian coal from October 2020, and Mongolia's customs clearance is not as expected due to the impact of the epidemic, and the import restrictions are strict, so it is difficult to improve the supply in a short time. In terms of demand, the operating rate of coking plant has been steadily increased with the rise of coke price. Moreover, the decline of inventory in coking plant led to the enhancement of stock replenishment sentiment, the intensity of demand did not decrease, and the situation of supply and demand continued to be tight. After China restricted the import of Australian high-quality coking coal, the price of high-quality main coking coal continued to be strong.

"At present, the steam coal market is shipping more, there is no low-cost selling, some are reluctant to sell, the market wait-and-see mood improved." The above researchers pointed out that under the situation of high daily consumption and low inventory of power plants, it is expected that the short-term steam coal price will have limited space to rise and is expected to operate stably. In terms of coking coal, overall, the supply of coking coal is tight. Due to the large increase of coal price, the downstream coke enterprises are struggling to increase the storage capacity. Due to the worry that the coal price will continue to rise sharply in the later period, the willingness to purchase raw materials is very strong. It is expected that under the support of demand, the price of coking coal will be stronger in the short term.

In terms of coal import, from January to April 2021, coal import was 90.13 million tons, a year-on-year decrease of 28.8%, "the main reason for the year-on-year decline is that the global coal demand is weak and China's coal demand is good due to the epidemic situation in 2020." According to the above researchers, the national development and Reform Commission has pointed out that in the past two years, under the premise of controlling the total amount of imported coal, the import coal consumption can not achieve the balanced linkage with the domestic demand in the light and peak seasons. The next step is to gradually adjust the policy of imported coal, so as to achieve less in off-season and more in peak season, so that the import demand is consistent with our domestic coal demand.

"In addition, the General Administration of customs requires all customs districts to strictly control the customs clearance volume in 2017, and the import quota in 2021 is generally allocated according to the customs clearance volume of the enterprise in 2017." The researcher said that, however, this is not a one size fits all, and the relevant districts are allocated according to the specific situation of the territory.

As for the coal import situation in 2021, Zhang Hong, Secretary of Discipline Inspection Commission of China Coal Industry Association, said that in terms of the current production layout, the import volume will continue to be stable at about 300 million tons.

Coal enterprises staged "ice and fire"

In 2020, this is not the case for the coal industry.

From the perspective of A-share market performance, due to the impact of the epidemic situation, "dual control of energy consumption" and safety inspection, the coal industry experienced shocks during the period, and the trend of the overall plate and its sub plate in the whole year was weaker than that of the Shanghai Composite Index. Among them, the operating revenue of Listed Companies in the coal sector was 1109.595 billion yuan, up 1.58% year on year; The gross profit was 279.719 billion yuan, down 6.48% year on year; The net profit attributable to the parent company was 91.943 billion yuan, a year-on-year decrease of 2.51%. In terms of specific sub sectors, the growth rate of revenue of steam coal plate slowed down, and the performance of the plate driven by demand continued to improve. With the gradual effective control of the domestic epidemic situation, the demand of each terminal was further released, and the operating income of each quarter during the period increased year-on-year. Affected by the 7.88% increase in operating costs, the gross profit in 2020 will drop to 223.024 billion yuan, with a year-on-year decrease of 6.31%; The gross profit rate decreased by 4.80 percentage points; The net profit attributable to the parent company decreased by 7.72% to 73.025 billion yuan.

In coking coal plate, because of the rising cost, the plate profit decreased year on year. According to the above researchers, the total sales volume of coking coal in 2020 will be about 185 million tons, with a year-on-year increase of 7.78%; The average selling price was about 623.61 yuan / ton, down 5.56% year on year. The operating revenue of the board companies was 206.902 billion yuan, a year-on-year decrease of 5.79%, which was slightly larger than the decrease of operating costs by 5.09%. The gross profit rate decreased by 1.70 percentage points, the gross profit decreased by 9.45% to 119.905 billion yuan, and the net profit attributable to the parent company also decreased compared with the same period.

And coke plate cost control is effective, plate performance is basically flat. According to the statistics of the above researchers, the total sales volume of coke plate in 2020 is about 21.689 million tons, with a year-on-year decrease of 3.75%; The average selling price was about 1853.45 yuan / ton, a year-on-year decrease of 1.43%. As a result, the operating revenue of plate companies was 54.109 billion yuan, a year-on-year decrease of 6.10%. Due to the effective effect of operating cost control, the gross profit of coke plate in 2020 is basically the same as that in 2019, with a year-on-year increase of 1.45% to 7.324 billion yuan; The gross profit margin of the sector increased by 0.90 percentage points, and the net profit attributable to the parent company increased by 14.32% to 3.431 billion yuan on a year-on-year basis.

In this situation, the performance of coal plate enterprises has a greater impact.

Among them, in the classification of CITIC industry, 70% of the enterprises' net profit attributable to the parent company decreased compared with that of last year. At the same time, leading enterprises such as Shenhua and Shaanxi coal industry performed well. "This is the embodiment of the improvement of coal industry concentration. Enterprises with rapid capacity expansion and perfect scale have stronger ability to resist risks." The researchers pointed out that among them, five listed coal enterprises had serious net profit losses, which were ranked from high to low as St Dayou, Zhengzhou coal power, * ST Pingneng, Liaoning energy and Anyuan coal industry. In its view, the losses of these enterprises are mainly affected by the impact of the new coronavirus pneumonia epidemic, the macroeconomic situation and the market environment. In addition, some companies are also affected by their own management factors. St Dayou, which has the most serious loss, has a net profit of - 1.036 billion yuan in 2020.

Industry concentration further improved

In the situation of coal enterprises, the industry's de capacity policy continues to promote, and the willingness to invest in new capacity is still weakening. According to the approval data of new coal mines, the approved scale of new production capacity has decreased significantly since 2020, and the newly-built production capacity is mainly concentrated in Xinjiang, and the willingness to invest in various regions is rapidly weakening.

According to the data, there are still a large number of small and medium-sized coal mines in China. There are a large number of mines with a production capacity of less than 600000 tons in the Middle East and southwest China, with a total production capacity of 523 million tons. This part of coal mines has the problem of resource depletion and is expected to withdraw before 2030. With the gradual withdrawal of some coal production capacity in the Middle East and southwest China, China's coal production capacity will gradually concentrate in Inner Mongolia, Shaanxi and Xinjiang. It is estimated that by 2060, China's coal production capacity will be only about 1 / 3 of the large-scale mines with a scale of more than 10 million tons, and the remaining capacity scale will be about 374 million tons.

The above researchers pointed out that in the past situation, the concentration of the coal industry showed a trend of gradual increase. By 2020, the output of raw coal of the top 8 large enterprises is 1.855 billion tons, accounting for 47.6% of the national total, which is 11.6% higher than that in 2015; Among them, the coal output of Enterprises above 100 million tons is 1.68 billion tons, accounting for 43% of the whole country; The coal output of Enterprises above 10 million tons is 3.0 billion tons, accounting for 77% of the whole country.

In 2020, the pace of strategic restructuring of coal enterprises will accelerate. Among them, Shenhua Group and Guodian group were merged and reorganized into national energy investment group; Shandong energy and Yankuang Group jointly reorganized and established new Shandong energy group; China Coal Energy merged and reorganized coal mining plates of state investment, poly and China Railway; Shanxi Province strategic restructuring established Jinneng holding group and Shanxi Coking Coal Group; Gansu Province, Guizhou Province, Guizhou Province, Shandong Province, Shandong Province and Yankuang Group established new Shandong energy group Liaoning Province reorganized and established Gansu energy and chemical industry investment group, Panjiang Coal and power group and Liaoning energy group. After the strategic restructuring, the coal output of four enterprises including state energy group, Jinneng holding group, Shandong energy group and China coal energy group exceeded 200 million tons, and that of Shaanxi coal chemical industry group and Shanxi coking coal group exceeded 100 million tons, and the concentration of coal industry increased significantly.

It is proposed in the outline of the 14th five year plan that coal production should be concentrated in resource rich areas. By the end of the 14th Five Year Plan period, the number of coal mines in China will be reduced to about 4000, 65 mines (open-pit) with a production capacity of nearly 1 billion tons will be built, 3-5 world-class coal enterprises with global competitiveness will be cultivated, enterprise merger and reorganization will be promoted, and 10 coal enterprises with an annual output of 100 million tons will be established.

?