HAITONG INT'L: Daily consumption significantly increased + import backwardation intensified, port coal prices are expected to stabilize.

HAITONG INT'L released a research report stating that the daily consumption of power plants last week increased significantly compared to the previous week, but the national temperature was warmer than the same period, so the increase was limited. However, as the temperature gradually decreases, demand is expected to enter a peak coal usage period. In addition, the increasing price difference between imported coal is expected to limit the short-term downward pressure on thermal coal prices. It is still necessary to continue monitoring the actual release of demand driven by economic recovery and macro policies. Looking ahead, with the dust settling from the U.S. election and domestic fiscal policy strengthening as expected, the fundamentals of the coal industry are stable. The start of the short-term peak season is expected to stabilize and increase coal prices, and the medium-term price level is expected to remain high. Coal companies with undervalued high dividend characteristics continue to focus on the long-term value of outstanding companies. Key points from HAITONG INT'L: October production has recovered to near historical peak levels, with continued strong supply and demand expected for the remainder of the year. Production: In October, China's raw coal production was 412 million tons, a year-on-year increase of 4.6% and a month-on-month decrease of 0.6%; cumulative production from January to October was 3.892 billion tons, a year-on-year increase of 1.2%. Demand: In October, production of thermal power, pig iron, and cement increased by 1.8%, 1.4%, and decreased by 7.9% year-on-year, respectively; cumulative production from January to October increased by 1.9%, -4%, and -10.3%. The National Bureau of Statistics reported that industrial value-added output increased by 5.3% year-on-year in October, with a month-on-month growth of 0.41%; cumulative growth from January to October was 5.8%. The Ministry of Finance, the State Administration of Taxation, and the Ministry of Housing jointly issued an announcement on November 13 regarding tax policies to promote stable and healthy development of the real estate market. HAITONG INT'L believes that the supply side has recovered to near historical peak levels, and there is little possibility of further production increase in November and December. On the demand side, improvements in steel and cement production in October were mainly due to seasonal and policy factors. With the arrival of the winter peak season, thermal power generation is expected to remain high, leading to overall strong supply and demand. Large increase in daily power plant consumption + increasing price difference for imported coal, port coal prices are expected to stabilize and rise As of November 15, the price of Qinhuangdao coal was 837 yuan per ton, down 10 yuan/ton week-on-week and 99 yuan/ton year-on-year (a decrease of 1.2% and 10.6% respectively). The Yulin 5800, Inner Mongolia ERDOS Resources, and Datong 5500 kcal indices increased by 5, -4, and -5 yuan/ton to 730, 655, and 712 yuan/ton respectively. From November 8-14, the average daily consumption of 25 coastal and inland power plants was 5.4 million tons, an increase of 1.4% compared to the same period (509 million tons) and an average inventory of 135.47 million tons, up by 5% from the previous week (133.13 million tons). As of November 15, the inventory at the four northern ports was 18.11 million tons, an increase of 4.8 and 50.4 million tons compared to the same period in 2023/2022 (down by 6.9 and 56.3 million tons respectively from the previous week). HAITONG INT'L believes that the daily coal consumption of power plants significantly increased week-on-week last week, but due to the warmer temperatures nationwide compared to the same period, the increase was limited. However, as the temperature gradually decreases, demand is expected to enter a peak coal usage period. In addition, the increasing price difference for imported coal is expected to limit the short-term downward pressure on thermal coal prices. It is still necessary to continue monitoring the actual release of demand driven by economic recovery and macro policies. Pay attention to the impact of safety supervision on the production volume of key production areas. Steel prices continue to decline in the off-season, while coke may remain volatile but difficult to fall sharply. Production: In October, China's coke production was 41.2 million tons, a year-on-year decrease of 0.9% and a month-on-month increase of 4.8%; cumulative production from January to September was 406 million tons, a year-on-year decrease of 1.1%. As of November 15, the second round of price reductions for coke has been implemented, with a total reduction of about 100 yuan/ton, and the third round of price adjustments is currently underway; coke prices are temporarily stable. As of November 15, the operating rate of coking plants was 72.5%, down 0.4 percentage points month-on-month; on the demand side, the average daily molten iron production of 247 steel mills in China was 2.36 million tons, an increase of 0.8% and 0.2% compared to the week and the same period last year (a 2% year-on-year decrease in the previous week). HAITONG INT'L believes that as downstream coal and steel industries enter the off-season, steel prices continue to decline, but overall molten iron production remains stable, providing support. Considering the contraction in steel mill profits, the third round of coke price reductions is expected to be implemented, but the probability of further significant declines is low. In terms of coking coal, influenced by slower downstream procurement pace and relatively sufficient production supply, coking coal prices continue a weak stability trend in the short term. However, in the medium term, considering the continued low levels of downstream coking coal inventories, if there is marginal improvement in demand or event-related factors in the supply side, the later stage should pay attention to the demand situation in the industrial chain and the progress of steel mill inventory replenishment. Related targets: (1) China Coal Energy, which is expected to see marginal improvements in operations and dividends, as well as leading thermal coal companies such as China Shenhua Energy and Shaanxi Coal Industry; (2) Inner Mongolia Dian Tou Energy Corporation, China Coal Xinji Energy, and Shanxi Coal International Energy Group, which are expected to see gradual improvement in performance and continued growth in the next 25 years; (3) Huaibei Mining Holdings, a low-valuation and growth potential coking coal leader; (4) Coal equipment companies that benefit from the implementation of coal capacity reserve policies, intelligent safety transformation of coal mines, and the "Belt and Road" initiative.Ndi Science & Technology (600582.SH) and Zhengzhou Coal Mining Machinery Group (601717.SH)Risk warning: Significant decrease in downstream demand, the impact of policies on ensuring supply and stable prices, and production restrictions need to be continuously monitored.