China coking coal is expected to continue strong pattern

Enthusiasm for downstream replenishment heats up

The coking plant in China has started well under the stimulus of profits, coupled with frequent coal mine safety inspections, and the supply of individual coal mines has shrunk. The coking coal market is relatively optimistic, and it is expected that there is still room for price increases.

Supply analysis

The output of coking coal is stable this year. Although the output of coking coal this year is at a high level in the past three years, the total supply is basically the same as in the same period in 2019. According to data from the National Bureau of Statistics, in September 2020, the national raw coal output was 331.07 million tons, a decrease of 0.9% year-on-year, and the decline was 0.8 percentage points larger than that in August; the average daily output was 11.04 million tons, an increase of 530,000 tons from the previous month. In addition, from January to September, the national raw coal output was 2,787.15 million tons, a decrease of 0.1% year-on-year.

Demand analysis

The output of steel mills remains high. Entering the traditional heating season, steel mills have frequently introduced environmental protection production restriction policies, but their efforts have slowed down compared with last year, and the scope of control has narrowed. Since the country was the first to get out of the epidemic, under the stimulus of policies, the growth of real estate and infrastructure investment continued to accelerate, and downstream industries such as automobiles, home appliances, and excavators were booming in production and sales. According to data from the National Bureau of Statistics, in September, the national crude steel output was 92.55 million tons, an increase of 10.9% year-on-year; the output of pig iron was 75.78 million tons, an increase of 6.9% year-on-year; the output of steel was 118.063 million tons, an increase of 12.3% year-on-year. At the same time, the national average daily output of crude steel was 3.0853 million tons, an increase of 0.8% from August, setting a new monthly high. The China Iron and Steel Association predicted on October 26 that the domestic crude steel output for the whole year will exceed 1 billion tons, an increase of 3% to 5% year-on-year. As of November 13, the average molten iron cost of 10 sample steel plants in Tangshan area excluding tax was RMB 2441/ton, the average billet including tax cost was RMB 3179/ton, and the average gross profit of steel plants was RMB 401/ton. The profit of steel mills is good, and production is expected to remain high in the fourth quarter.

In general, in terms of operation, it is recommended to maintain the idea of ​​doing more in batches on the coking coal 2101 contract. The entry interval is set at 1350-1370 yuan/ton, the position is controlled at 50%, the target is set at 1450 yuan/ton, and the stop loss is set. At 1300 yuan/ton.