HK Stock Market Move | Coal stocks collectively rising, the number of coking coal mines in Shanxi province that have stopped production has exceeded a hundred. Institutions suggest that safety production supervision may be upgraded.

Coal stocks collectively rose. As of the time of drafting, Mongolian coking coal (00975) rose by 8.29%, to 8.36 Hong Kong dollars; KINETIC DEV (01277) rose by 4.62%, to 1.81 Hong Kong dollars; YANCOAL AUS (03668) rose by 3.84%, to 37.32 Hong Kong dollars; China Shenhua Energy (01088) rose by 1.28%, to 44.16 Hong Kong dollars. On the news front, on May 22, a gas explosion occurred at the Liushenyu Coal Mine in Qin Yuan County, Changzhi City, Shanxi Province, resulting in 90 deaths as of May 23. According to statistics released by Mysteel, the number of coking coal mines in Shanxi that have halted production has risen to 109, with a total capacity of 122 million tons and affecting the output of raw coal by 319,500 tons. It is reported that Shanxi is a major producing area for coking coal in China, and the supply of coking coal has significantly contracted. Huatai believes that the preliminary investigation of the accident reflects issues such as "hidden working faces" and "unclear number of workers going underground", which we believe may trigger an upgrade in safety production supervision, affecting coal production. Combined with the already tight coal supply and demand balance this year, this may accelerate the rise in coal prices. We continue to recommend Yankuang Energy Group AH as a coal target, while coking coal targets such as SHOUGANG RES, Shanxi Coking Coal Energy Group, and Shanxi Lu'an Environmental Energy Dev. Co., Ltd. will also benefit from the structural reduction in coking coal production.