Zhongjin: Turning point of the off-season and peak season is coming, supply and demand tend to be tight balance

Zhongjin released a research report stating that, after the National Day holiday, as of October 15th, the coal sector had accumulated a 6.9% increase, mainly due to the industry's profit margin recovery in the third quarter which strengthened market confidence, the expectation of tightening coal supply in the fourth quarter, and the increased focus on sectors with defensive attributes in the face of escalating geopolitical risks. In the short term, it is expected that with the rise in coal prices and increased seasonal demand, profits are expected to further improve. Zhongjin's main points are as follows: Coal prices rebounded in the third quarter, helping to restore industry profits In the third quarter, the prices of 5500 kcal/kg power coal and main coking coal in North Port rose to 674 yuan/ton and 1,555 yuan/ton, rebounding from the low points of 638 yuan/ton and 1,337 yuan/ton in the second quarter, driving overall improvement in industry profits. From January to August this year, the total profit of the coal mining and washing industry decreased by 53.6% year-on-year to 193.7 billion yuan. In August, the total monthly profit was 27.1 billion yuan, a decrease of 40% year-on-year but an increase of 55% month-on-month, showing a significant improvement. Daily coal consumption is approaching the turning point between off-peak and peak seasons, and the "anti-internal circulation" of electricity provides support for power coal prices Around mid-October is usually the turning point for the transition between off-peak and peak seasons for coal consumption. With the gradual arrival of the heating season, demand for winter coal storage purchases is expected to strengthen, and daily consumption is expected to enter a peak season trajectory in the next 2-3 weeks, providing support for the demand for power coal. In addition, the recent strengthening of the "anti-internal circulation" in the downstream electricity industry, as well as stable electricity prices, is expected to provide better support for power coal prices. Domestic supply remains tight, and imports remain high The Ministry of Emergency Management announced that inspection teams for safety production assessments will be stationed in various locations to conduct annual inspections from November to December. In the short term, coal production in the main producing areas is expected to remain stable, and with the background of increased inspections for overproduction and strengthened safety production, there is still an expectation of supply tightening domestically. On the import side, improved demand may support the maintenance of high coal imports. However, currently, there is an inversion in high and medium-high calorific power coal prices domestically and internationally, which may impose some constraints on further import growth. The supply and demand of coal may trend towards tight balance in the fourth quarter, favoring continued improvement in industry profits After the National Day holiday, coal prices continued to rise, with the prices of 5500 kcal/kg power coal and main coking coal in North Port reaching 728 yuan/ton and 1,660 yuan/ton as of 10/15, surpassing the average price in the first quarter, reflecting market expectations of improving demand and remaining tight supply. Looking ahead to the fourth quarter, it is expected that the supply and demand of coal will trend towards a tight balance, favoring continued upward movement in coal prices and expecting the continued recovery of coal enterprise profits. Risk factors Release of supply exceeding expectations; Improvements in demand below expectations; Escalating geopolitical risks.