Heavy snowfall in the main producing area is hard to change the decline of coal

The demand growth is weak, the supply continues to improve, the upstream profit of power coal will gradually fall, and the coal price rate will maintain a weak downward trend. It is suggested that investors should deal with short positions. For hedging customers, selling at high price is the main way. In 2019, the trend of power coal is rising first and then falling. The cci5500 price index entered the green range of coal price in the fourth quarter, and then did not exceed the upper limit of 570 CNY/ton. Looking forward to 2020, although the coal price has been in the green range, the downward trend is not over, and it is expected to continue to fall. Macro pressure cannot be ignored at the international level. Major economies show signs of slowing economic growth. In December 2019, the manufacturing PMI of the euro area recorded 46.3, which is at a historical low, while the United States recorded a new low of 47.2 since the 2008 financial crisis. Although the economic cycle guided by PMI data is not long, its recovery usually has a gradual process. Based on the above judgment, the author expects that even though it is the bottom of PMI, it will take several months for it to recover to the top of the 50 prosperity and dry line, that is to say, the two major economies in the world will still face contraction pressure in the future.

At the domestic level, thanks to the bottom and recovery of inventory cycle, the PMI data in November December 2019 continued to expand, but the domestic economic adjustment is far from the end, while the external environment has not improved significantly, so the macro pressure will not be ignored. On the supply side, domestic production will grow steadily, import growth will slow down, and the overall growth rate will be higher. In the post supply side reform period, the industry effect is in an excellent state, the investment is growing rapidly, the high-quality production capacity is released orderly, and the total production capacity of the whole country will rise steadily. According to the data, the investment in coal mining and dressing industry increased by 27.3%, a new high since 2011. The author judges that, driven by profit, investment will still maintain a high growth rate in 2020, and the certainty of steady increase of domestic coal production is high. In terms of import, first, the difference between domestic and foreign coal prices will gradually converge, and the profit of imported coal is expected to shrink in 2020; second, under the background of loose domestic coal supply, "horizontal control" may increase; third, considering the high base in 2019, the growth rate of imported coal in 2020 is likely to slow down. In terms of demand, it is expected to achieve small growth in 2020. First of all, according to the growth rate of coal consumption of six major power plants in December 2019, the growth rate of thermal power in 2019 is expected to be slightly higher than 2%, and the growth rate of total power generation is expected to be slightly higher than 4%, all of which are low values in recent four years.

It is expected that in 2020, the economy will be mainly stable, the demand for electricity will grow steadily, the growth rate of power generation will be expected to rise slightly under the low base in 2019, and the coal consumption for hot work will be increased slightly. In other aspects, the resilience of the real estate industry will be further reflected in the first half of 2020. The demand for building materials will be basically stable, but there is a high probability of pressure in the second half of 2020. In chemical industry, affected by the downturn in the industry, the growth of coal demand for chemical industry is limited. The industry pattern has changed in the aspect of inventory. High inventory in the lower reaches, lower inventory in the middle reaches and accumulated inventory in the upper reaches have become new phenomena in the industry. First of all, the downstream has fully adapted to the new environment after the supply side reform. The inventory of key power plants has reached the level of billion tons, and the coastal power plants have maintained high inventory since the second half of 2018. High inventory strategy makes power plants have stronger bargaining power in the face of coal enterprises and trading enterprises, and suppresses the rising space of coal prices. Secondly, the upstream coal enterprises have entered the accumulation stage. In terms of national key coal mines, the inventory will increase by 60% in 2019.

With the accumulation of producing areas, the downward adjustment pressure of mine mouth coal price increases. In terms of transportation, with the opening of Haoji railway to boost the direct railway development, the shortage of coal supply in Central China will be eased, and the demand for river sea intermodal coal will decline, which makes the northern port shipping under pressure. In addition, with the volume of Railways such as varri and Tanghu, the capacity of rail water intermodal transportation is more abundant. In the face of limited shipping volume, the railway and port will face more fierce competition, which will drive down the transportation cost and further pressure the port coal price. All in all, the demand growth is weak, the supply continues to improve, the upstream profit of power coal will gradually fall, and the coal price rate will continue to maintain a weak downward trend. The author believes that in 2020, the price of power coal will go down further, and investors should deal with it in a short way. More than 550 CNY/ton will enter the short selling area, and more than 570 CNY/ton will have a higher safety margin. For hedging clients, the dominant strategy in 2020 is to sell at high prices.