Open Source Securities: The positive fundamentals of coal continue, and the layout on the right side of the inflection point is in progress

According to the Zhitong Finance APP, Kaiyuan Securities released a research report stating that as of July 25, the Qinhuangdao Q5500 thermal coal closing price was 653 yuan/ton, with the lowest price in the first half of this year being 609 yuan, an increase of 7.2% cumulatively. Currently, the fundamentals of thermal coal continue to be bullish: From the supply side, as of July 20, the operating rate of 442 coal mines in Shanxi, Shaanxi, and Inner Mongolia was 81.3%, still at a relatively low level for the year. From the inventory side, port inventories continue to decline, with the inventory in the Bohai Rim at 26.943 million tons as of July 25, down from the highest inventory of 33.163 million tons in the first half of this year, a cumulative decrease of 18.8%. From the demand side, thermal coal is currently in the summer peak season, with daily coal consumption for power generation running at high levels since July, coupled with the impact of high temperatures and precipitation this week, supporting prices.

The main points of Kaiyuan Securities are as follows:

Thermal coal and coking coal prices continue to rebound

For thermal coal: The price of thermal coal continues to rebound, with the Qinhuangdao Q5500 thermal coal closing price at 653 yuan/ton as of July 25, up from the lowest price of 609 yuan in the first half of this year, an increase of 7.2% cumulatively.

Currently, the fundamentals of thermal coal continue to be bullish: From the supply side, as of July 20, the operating rate of 442 coal mines in Shanxi, Shaanxi, and Inner Mongolia was 81.3%, still at a relatively low level for the year. From the inventory side, port inventories continue to decline, with the inventory in the Bohai Rim at 26.943 million tons as of July 25, down from the highest inventory of 33.163 million tons in the first half of this year, a cumulative decrease of 18.8%. From the demand side, thermal coal is currently in the summer peak season, with daily coal consumption for power generation running at high levels since July, coupled with the impact of high temperatures and precipitation this week, supporting prices.

For non-electric coal, as of July 24, the domestic methanol operating rate was 81.66%, up 1.06 percentage points month-on-month, still at historical highs in recent years; the U.S. and EU sanctions on Russian exports and the supply expectations from Iraqi oil fields being affected by drone attacks have led to fluctuations in international crude oil prices. The cost advantages of coal-to-chemical processes remain prominent compared to oil-based chemicals, resulting in a prolonged high operating rate.

For coking coal: As of July 25, the main coking coal price at Jingtang Port was 1,680 yuan/ton, up 240 yuan/ton, an increase of 16.67%, rebounding from the bottom of 1,230 yuan at the beginning of July; coking coal futures have rebounded even more significantly, rising from 719 yuan in early June to the current 1,259 yuan, a cumulative increase of 75.1%. The current fundamentals of coking coal reflect characteristics of "strong expectations but weak reality."

On the supply side, the National Energy Administration recently issued a notice on organizing coal mine production situation verification to promote stable and orderly coal supply, with measures to investigate overproduction leading to tightening expectations for coal supply; on the demand side, the Yajiang Hydropower Station is expected to drive overall demand in the black industry chain, potentially taking over the demand for steel exports that surged in the first half of the year.

Investment logic: Thermal coal and coking coal prices have reached the right side of the turning point

Thermal coal is a policy-driven coal type, and it is judged that prices will continue to rebound and recover to long-term contract prices, primarily around the long-term contract prices of central enterprises like Shenhua and China Coal (around 670 yuan). If the fundamentals continue to be bullish, it is also expected to break through 700 yuan The main reasons include:

First, lower coal prices will increase pressure on local finances, which is expected to lead to production cuts, including the possibility that coal companies will voluntarily reduce production due to cash losses from lower coal prices; Second, power plants are constrained by the "coal-electricity price linkage mechanism," which means that maintaining coal prices to some extent is equivalent to maintaining electricity prices. Currently, the spot price is lower than the annual long-term contract price, and the behavior of power plants prioritizing spot purchases will continue to drive up spot prices; Third, there is competitive cost advantage between coal chemical and oil chemical industries, with the cost of producing olefins from Brent crude oil at $68 and port coal price at 770 yuan being comparable, and currently coal prices are significantly cheaper compared to oil prices; Fourth, lowering coal prices will cause Xinjiang coal to lose its price advantage for transportation, leading to a decrease in transportation volume (data since the fourth quarter of 2024 has already proven this).

Coking coal is a market-oriented coal type, and its price is more determined by supply and demand fundamentals. The "ratio of coking coal to thermal coal prices" can serve as a reference for judging the bottom of coking coal prices, and currently, coking coal is in an oversold state. Under the expectation of "anti-involution" policies, there is an expectation of tightening on the supply side of coking coal; on the demand side, stable growth policies continue to emerge, and with Trump's election as President of the United States, his high-pressure foreign trade policies towards China will promote a further transformation of the domestic economy towards internal circulation, providing more support for real estate and infrastructure.

Investment Suggestions: Dual Logic of Cycle and Dividend, Four Main Lines of Layout

In the context of high uncertainty in global political and economic conditions and expectations for stabilizing the domestic economy, investment behavior shows emotional impulses. The coal sector possesses both cyclical and dividend attributes, with current coal holdings at low levels and the fundamentals having reached the right side of the turning point, making it the right time to layout.

Four main lines of selected coal stocks that will benefit: Main line one, cyclical logic: Shanxi Coking Coal Group (601001.SH), Yanzhou Coal Mining Company (600188.SH) for thermal coal; Pingmei Coal (601666.SH), Huaibei Mining (600985.SH), Lu'an EED (601699.SH) for metallurgical coal; Main line two, dividend logic: China Shenhua (601088.SH), China Coal Energy (601898.SH) (dividend potential), Shaanxi Coal and Chemical Industry; Main line three, diversified aluminum elasticity: Shenhuo Co., Ltd. (000933.SZ), China Power Investment Corporation (002128.SZ); Main line four, growth logic: XINJI ENERGY (601918.SH), Guanghui Energy (600256.SH).

Risk Warning

Risks of economic growth slowdown, supply-demand mismatch risks, and accelerated replacement risks of renewable energy