Guotai Haitong: Coal supply recovered as expected in September; focus on shifts in supply-demand dynamics after winter stockpiling

Guotai Haitong released a research report stating that national raw coal output recovered to 385 million tonnes in September, an increase of approximately 23.31 million tonnes month-on-month and a rebound of about 42 million tonnes from the July low of 340 million tonnes, indicating that the period of greatest supply contraction pressure has passed. On the demand side, thermal power generation in September fell 1.4% year-on-year, and urban and rural residential electricity consumption fell 6.0% year-on-year, with overall demand performance relatively stable. As coal output continues to recover, the previously tight supply-demand situation has shown marginal easing. Entering October, policy efforts to stabilize production and ensure supply have further intensified, with the National Development and Reform Commission and the National Energy Administration pushing suspended coal mines in Shanxi to accelerate resumption and ramp-up to full capacity, which, combined with continued output recovery in other major producing regions, is expected to leave further room for coal supply to increase. On the demand side, winter stockpiling in northern China provides support for coal prices, but actual winter temperatures and end-user coal consumption still need to be observed. The bank believes that the core contradiction in the fourth-quarter coal market will gradually shift to the game between supply recovery and demand absorption; as the supply-demand balance improves marginally, the upward slope of coal prices may slow, and attention should be paid to the sustainability of winter stockpiling demand and the implementation of production-boosting and supply-guarantee policies. Guotai Haitong's main views are as follows: Supply side: Domestic coal output rebounded month-on-month, imports rebounded month-on-month 1) Domestically, national raw coal output above designated size was approximately 385 million tonnes in September, up 6.4% month-on-month and down 6.8% year-on-year. By province, raw coal output in Inner Mongolia, Shanxi, Shaanxi, and Xinjiang all increased month-on-month, by approximately 5.94 million, 4.23 million, 4.08 million, and 3.23 million tonnes, respectively; although Shanxi's output recovered, it was still down 31.3% year-on-year. 2) On imports, national coal imports were approximately 43.37 million tonnes in September, up 3.0% month-on-month and down 5.7% year-on-year. By coal type, coking coal imports were approximately 13.47 million tonnes, up 3.0% month-on-month and up 23.3% year-on-year; thermal coal imports were approximately 29.90 million tonnes, up 3.0% month-on-month and down 14.8% year-on-year. Demand side: Electricity demand fell month-on-month, thermal power fell month-on-month, non-power downstream performance diverged 1) On the electricity consumption side, total electricity consumption in September was 899.7 billion kWh, up 1.2% year-on-year and down 12.9% month-on-month. Among this, electricity consumption by the secondary and tertiary industries grew 1.7% and 4.9% year-on-year, respectively, while residential electricity consumption fell 6.0% year-on-year and 35.7% month-on-month. 2) On the power generation side, thermal power generation above designated size fell 14.8% month-on-month in September, hydropower generation fell month-on-month, and nuclear, wind, and CECEP Solar Energy generation all grew year-on-year. 3) On the coal-coke-steel front, September output of coke, pig iron, and crude steel all fell month-on-month, down 2.2%, 3.4%, and 1.4%, respectively, and down 8.2%, down 1.4%, and up 0.1% year-on-year, respectively; steel exports were 10.49 million tonnes, up 3.3% month-on-month and up 0.2% year-on-year; August billet exports were 1.926 million tonnes, down 23.8% month-on-month and up 9.2% year-on-year. 4) In other non-power sectors, September cement output rose 11.6% month-on-month but was still down 5.3% year-on-year; urea output fell 6.0% month-on-month and rose 3.3% year-on-year. Investment recommendation: Recommend Shaanxi Coal Industry, Yankuang Energy Group, China Shenhua Energy, and China Coal Energy; in the coking coal sector, recommend Huaibei Mining Holdings and Pingdingshan Tianan Coal. MiningCo.,Ltd. Risk warning: Economic growth falling short of expectations; large-scale entry of imported coal; supply exceeding expectations.