Power coal is expected to enter the ascending channel

Since the beginning of September, the price of power coal has experienced a continuous downward trend, and the price has reached a periodic low point. At present, the market has different opinions on the price trend of power coal. In the context of the digestion of bad expectations, the market will return to rationality, fundamentals will still dominate the price trend, and prices are expected to enter the rebound channel. On September 26, the executive meeting of the State Council decided to improve the formation mechanism of coal-fired power generation on grid price, promote electricity market-oriented transactions, and reduce the power cost of enterprises. In order to speed up the establishment of a market-based electricity price formation mechanism by means of reform, the meeting decided to seize the opportunity that the current market-based trading electricity of coal-fired power generation has accounted for about 50% and the electricity price is significantly lower than the benchmark on grid price. For the coal-fired power generation that has not yet achieved market-based trading, from January 1 next year, the linkage mechanism of coal-fired power price will be cancelled and the current benchmark on grid price mechanism will be changed to“ The market mechanism of "base price + fluctuation".

The benchmark price shall be determined according to the current benchmark feed in tariff of coal-fired power generation in each region, with the floating range of no more than 10% and no more than 15% in principle. The specific tariff shall be determined by the power generation enterprises, power sales companies, power users, etc. through negotiation or bidding. However, it will not rise in the next year, especially to ensure that the average industrial and commercial tariff will only fall but not rise. At the same time, the electricity consumption of residents, agriculture and other areas of people's livelihood will continue to implement the current catalogue price to ensure stability. From the perspective of futures price trend at this stage, it is possible for the market to over digest the impact of the government's cancellation of the linkage mechanism of coal and electricity prices. In actual operation, the on grid electricity price is not expected to decline significantly. The probability is mainly stable, which has a weak impact on the profits of thermal power generation enterprises. Short term power enterprises will not exert pressure to reduce the price of power coal. In addition, from the perspective of basis, in the first half of this year, the range of basis discount is around 20 CNY/ton. At present, the range of futures discount is at a high value in this year, and the rise of market price has a certain margin of safety. Therefore, the price of power coal futures is distorted at the bottom due to the over pessimistic expectation of the market. With the passage of time, the price will gradually enter the rebound channel. The arrival of winter storage and heating season supports the recovery of power coal demand.

At this stage, a large area of cooling weather is coming in the north. On November 15, the north will enter the heating season, and the power demand is expected to enter the recovery channel. At the same time, the increase of port inquiry demand and the stronger willingness of traders to ship goods are expected to reduce the inventory of ports around the Bohai Sea, and the market panic is greatly relieved. In addition, at this stage, the price of power coal is relatively low, the downstream is expected to enter the stage of replenishment for winter storage, and the rising channel of demand has been opened. From the perspective of market price, multiple worries and panic factors in the early stage of the market make most of the pessimistic price expectations digest in advance, and the medium-term price is expected to enter the recovery channel. On the supply side, the market expects that the supply of power coal will be loose in the next period, but the latest data shows that the growth rate of supply is not as pessimistic as we expected, on the contrary, the growth rate of raw coal production will slow down, showing that the supply side is still stable. On the demand side, after the market enters the winter storage and heating season, the demand is expected to enter the recovery channel, while the growth rate of power production continues to accelerate. Multiple worries and panic factors in the early stage of the market make most of the pessimistic price expectations digest in advance, and the mid-term price is expected to enter the recovery channel. In terms of policy, the market may over interpret the impact of coal and electricity price linkage mechanism, and the negative effect of the actual policy may have been over reflected in the futures price. In summary, from the perspective of the current futures price trend, it is possible for the market to over digest the impact of the government's cancellation of the linkage mechanism of coal and electricity prices in the early stage. Under the background of relatively stable supply and expected recovery of demand, the price of power coal has been at the bottom of the stage, and there is very limited space for further decline. At the same time, the futures price is expected to rebound at the bottom. Therefore, the price of power coal in the medium and long term may show a strong trend of bottom oscillation.