lu'an EED(SH:601699)2025-08-05 15:42Summary of Conference Call on Coal Industry Industry Overview - The focus is on the coal sector, particularly coking coal and thermal coal, which are experiencing a recovery after two years of decline, driven by rising futures prices and supply-side disruptions [1][2]. Key Points and Arguments - Coking Coal Price Recovery: Coking coal prices have shown significant elasticity, with recent increases attributed to supply-side constraints and improved fundamentals. The market is expected to continue this upward trend [2]. - Impact of Document 108: The issuance of Document 108 aims to stabilize thermal coal prices and ensure the stability of the Producer Price Index (PPI). The target price for long-term thermal coal contracts is set at 675 RMB/ton, with current prices around 666-670 RMB/ton, indicating a close alignment with the target [3]. - Supply-side Disruptions: Various regions, including Xinjiang and Shanxi, are conducting capacity checks in response to Document 108, leading to some mines halting production. This has resulted in a marginal contraction in coking coal supply [4][5]. - Investment Opportunities: The upcoming September military parade and National Day celebrations are expected to tighten supply further due to stringent safety and environmental regulations, creating investment opportunities in the coking coal sector [6]. - Potential Capacity Recovery: Some mines with incomplete procedures may need to restore capacity, potentially affecting 100-200 million tons. However, if all regions revert to pre-2022 capacity levels, the overall contraction could be substantial [7]. - Recent Price Movements: Since the implementation of Document 108, port thermal coal prices have accelerated, with current prices nearing 670 RMB, up by 50-60 RMB from the bottom. Coking coal prices have risen from 1,200 RMB to 1,650 RMB, reflecting a significant increase [8]. - Railway Freight Adjustments: The cancellation of freight discounts in Xinjiang has increased coal costs, leading to further supply-side contractions. It is anticipated that supply will not fully normalize before the National Day [9]. Additional Insights - Coal Sector's Role in Market Dynamics: Although coal is not a mainstream sector in the "anti-involution" framework, it remains a crucial component. The sector has seen early policy responses and is currently undervalued, with many companies trading below book value [10]. - Future Supply and Demand Expectations: The industry is expected to hit bottom by the end of 2026, with a supply-demand reversal anticipated in 2027. Current policies are expected to support price stability, particularly for dividend-paying companies like China Coal, Shenhua, and Shanxi Coal [11]. - Short-term Price Projections: The thermal coal market is under significant supply contraction pressure, with prices expected to rebound to between 600 and 800 RMB, ideally maintaining above 675 RMB to avoid procurement difficulties for power plants [12]. - Recommended Companies: Companies with strong elasticity in the thermal coal sector include Yanzhou Coal and Jinneng Holding. Coking coal companies like Lu'an Energy are also highlighted for their short-term potential. Dividend-paying companies are recommended for long-term investment opportunities [13][14]. - Overall Market Outlook: The coal sector's fundamentals are improving, with a clear upward price trend and effective supply contraction. Continued policy support is expected, making the coal sector an attractive investment opportunity in the current market environment [15].