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Summary of Coal Industry Weekly Report

Market Overview

In the week leading up to October 22, 2023, the coal industry experienced a mixed performance. China's national coal production reached its second-highest level for 2023 in September, up 2.8% month-on-month and ranking second only to March 2023. This followed a 16 percentage point deceleration from August, with cumulative production of 3.44 billion tons for the first nine months, up 3.0% year-on-year. The increase was attributed to enhanced supply measures by authorities, including safety checks at major coal-producing regions like Shanxi, Shaanxi, and Inner Mongolia, which supported higher output. However, routine safety inspections have now normalized, stabilizing supply potential.

Supply and Imports

Coal imports dropped significantly in September, falling 49.55% month-on-month and 73.1% year-on-year, with total imports reaching 42.14 million tons. Reasons include seasonal cooling demand and higher domestic and international prices. Specifically, domestic electricity consumption decreased, and international factors such as reduced Indonesian exports due to production issues and a new Russian export tariff impacted supplies. The import average price rose to US$9,476 per ton in September.

Power Generation

Power generation saw a structural shift in September, with coal-fired power output turning positive year-on-year, up 23% after a negative 22% in August. Hydropower surged 392% due to favorable rainfall, while nuclear power increased 67%. This may reduce hydropower's demand impact in the upcoming dry period, supporting coal demand.

Price and Inventory Dynamics

Coal prices fell in price indices like the BCPCI and CCI indices by 1-34%, analysts data shows. For instance,动力煤 prices dropped to around US$1,319 for Newcastle coal (down 68%). Ports held approximately 62.9 million tons of inventory at the week's end, up 3.3% year-on-year, with major demand centers like China's six large power plants seeing stockpiles increase, extending usage days.

Market Performance

The coal sector underperformed broader indices, declining 0.95% weekly, with individual stocks varying. Top gainers included晋控煤业 and宝泰隆, while losers like美锦能源 reflected the volatility tied to sector-specific issues.

Investment Recommendations

Prioritize companies like中国神华 and陕西煤业 due to stable dividends and low volatility, and monitor中煤能源 for its financial recovery and new production capacity. The outlook favors stability during winter storage.

Key Risks

Potential coal price fluctuations, downward demand shocks, and supply chain disruptions are ongoing risks.

Disclaimer: This summary is based on the original report from Analyst Zhao Ze and Lin Yinan of Anxin Securities. Refer to the full report for details.