Coal Industry Analysis

my country’s current energy structure

In 2021, my country’s total energy consumption will be 5.24 billion tons of standard coal, a year-on-year increase of 5.15%. Although the proportion of coal consumption continues to decline, the absolute number is still growing. In 2017, coal consumption was 3.914 billion tons, and in 2019, coal consumption was 40.19 In 1993, my country became a net importer of crude oil, and in 1996, my country became a net importer of refined oil. In 2019, my country’s total crude oil energy consumption was 672.683 million tons, and the imported crude oil volume was 505.676 million tons. 10,000 tons, accounting for 75.17%. For a long time in the future, unless there is a shale oil revolution in China or a breakthrough in controllable nuclear fusion technology, the pattern of my country’s rich coal, poor oil and little gas will not change.

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Source: National Bureau of Statistics

my country’s current power structure

At present, my country’s electricity production is mainly based on thermal power generation, that is, the use of fuel to heat, heat water, form high-temperature and high-pressure superheated steam, drive the gas turbine to rotate, drive the generator rotor (electromagnetic field) to rotate, the stator coil cuts the magnetic lines of force, generates electricity, and then uses it to boost The transformer is raised to the system voltage, connected to the grid, and transmits electrical energy to the outside.

Then the steam enters the steam turbine along the pipeline and continuously expands to do work, and the impingement steam turbine rotor rotates at a high speed, and the steam turbine drives the generator to generate electricity. Finally, it is further boosted by the feed pump and sent back to the boiler to repeat the above cycle process. The electricity generated by the generator is boosted by the transformer and then input to the power grid. Since my country’s coal energy is relatively abundant and cheap, coal is mainly used as fuel, and other power generation methods are used as supplements. In 2020, my country’s thermal power generation will account for 68.52% of the electricity production, hydropower will account for 17.16% of the total electricity production, and the rest will account for 68.52% of the total. ratio of 14.32%

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Source: National Bureau of Statistics

The characteristics of power generation determine that thermal power is the relatively optimal option for current power generation

Thermal power generation

Power generation by burning combustibles has the advantages of stable power generation, no need for peak regulation, mature technology, and the disadvantage of carbon dioxide emissions

hydroelectric power

By converting gravitational potential energy into kinetic energy, it drives the hydro turbine unit to do work and convert it into electric energy. The advantages are that it is pollution-free and has a long use time. A hydropower station can operate for decades. The disadvantage is that there are dry seasons. Have a meal

PV

By converting light energy into electrical energy, the disadvantage is that it cannot generate electricity without light

wind power

Convert the kinetic energy of the wind into mechanical kinetic energy, and then convert the mechanical energy into electrical kinetic energy.

In addition to the above, other power generation methods also have shortcomings such as immature technology, high power generation cost, and heavy load on the power grid.

Elasticity coefficient of electricity consumption

It can be found from the following data that my country’s electricity consumption elasticity coefficient has experienced two cycles from 2008 to 2020. The first cycle is the upward phase from 2008 to 2013, the downward phase from 2014 to 2015, and the downward phase from 2016 to 2020. It is the upward stage of the second cycle. The upward cycle of the first stage is due to the four trillion stimulus plan, the downward stage is due to the gradual fading of the stimulus plan, and the upward cycle of the second cycle is due to the rise of the tertiary industry and residential electricity consumption.

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Changes in electricity consumption in different industries from 2008 to 2020

It can be found from the data below that the proportion of total electricity consumption in the secondary industry from 2008 to 2020 has continued to decline, but the absolute amount is still increasing. The growth structure has changed, from the secondary industry to the tertiary industry and residential electricity consumption

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The popularity of new energy vehicles will drive the growth of electricity consumption

In 2021, my country’s new energy vehicle production and sales have exceeded 3.5 million units, a year-on-year increase of 169.6% and 165.1% respectively compared with 2020. By the end of 2021, the number of new energy vehicles in the country will reach 7.84 million, an increase of 59.3% from the end of 2020. It is mentioned in the “New Energy Vehicle Industry Development Plan (2021-2035)” that by 2025, my country’s new energy vehicle market will be significantly competitive. Enhancement, major breakthroughs have been made in key technologies such as power batteries, drive motors, and vehicle operating systems, and the safety level has been comprehensively improved. The average power consumption of new pure electric passenger vehicles will drop to 12.0 kWh/100 kilometers, and the sales of new energy vehicles will account for about 20% of the total sales of new vehicles. The sales of energy vehicles are 3.521 million, accounting for 13.4%. As of the end of June 2022, the number of new energy vehicles in the country has exceeded 10 million. In the first half of 2022, the sales of vehicles were 12.057 million, and the sales of new energy vehicles were 2.6 million, a year-on-year increase. 1.2 times, and the market share reaches 21.6%. At the current growth rate, by the end of 2025, the number of new energy vehicles is likely to exceed 30 million

The average annual mileage and unit electricity consumption are calculated in combination with the “Global EV Outlook 2020” released by the International Energy Agency. The results are as follows:

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Source: Cinda Securities

In 2025, it is estimated that the power consumption of new energy vehicle charging and swapping services will be 128.05 billion kWh, an increase of 107.05 billion kWh compared with 2020, and the charging piles used by new energy vehicles are generally used during the peak power consumption period at night 18-21 o’clock , the charging of new energy vehicles will bring a larger load to the grid

coal supply

As of the end of July 2022, the raw coal output in 2022 was 2,561.514 million tons, a year-on-year increase of 11.5%, and the raw coal output in 2021 was 4,071.36 million tons, a year-on-year increase of 4.7%. The National Mine Safety Supervision Bureau will review and confirm 207 coal mines in 2021 to ensure supply and increase production capacity. On the basis of 310 million tons, in 2022, the State Mine Safety Supervision Bureau will review and approve 147 coal mines with advanced production capacity, increasing the production capacity by 180 million tons per year. Since September last year, the total production capacity has increased by 490 million tons/year, and the Bohai Rim thermal coal price index (2021.12.22-2021.12.28) closed at 737 yuan / ton, (2022.9.7-2022.9.14) closed at 734 yuan / ton, there is no significant change in the whole year, but why the increase of 490 million tons of production capacity still does not solve the problem of coal shortage and soaring coal prices?

International energy prices are soaring, domestic coal needs to make up for the gap in imported coal

On September 15, 2022, the reference price of 5,500 kcal coal price (FOB) in Australia is 193.4 yuan/ton, or about 1,350 yuan/ton, and the reference price of 4,600 kcal coal price (FOB) in Indonesia is 129.2 yuan/ton, about Total RMB 901.8/ton (source: coal rivers and lakes), at the same time, Qinhuangdao’s annual long-term association 5500 kcal sold only 719 yuan/ton. In 2019, the coal output was 3,846.33 million tons, and the import was 299.77 million tons. In August 2018, the national coal import volume was 29.46 million tons, a year-on-year increase of 5.0%, and a decrease of 21.8% in the previous month. From January to August 2022, the national coal import volume was 167.98 million tons, a year-on-year decrease of 14.9%

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(2) The new production capacity is not high-quality production capacity, and the increase in production capacity does not mean that the average calorific value has reached the original production capacity level

(3) Output of major domestic thermal coal listed companies

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From the above data, it can be seen that the growth rate of coal production of major listed companies is not high, mainly due to the nuclear increase in the original high-quality coal mines. Significant reduction. In the past, the sales volume was composed of self-produced coal and trade coal. Coal prices rose, and the gross profit margin of trade coal was not high. Enterprises reduced the purchase of trade coal.

Insufficient capital expenditure, capacity recovery will take time

Since 2015, the supply-side structural reform has been promoted, and the investment in the coal industry has continued to decline. In 2013, the fixed asset investment in the coal mining and dressing industry of the state-owned economy was 165.7 billion yuan. , the investment scale of coal mining and dressing industry continues to decline. In 2013, the investment in the industry was 521.257 billion yuan. In 2017, only 264.838 billion yuan remained, a decrease of 49.19%. The new coal mining capacity came from the planning in 2015 or even earlier. , In June 2011, Shaanxi Coal Group paid 5.765 billion yuan for the Xiaohaotu mining right on behalf of the Shaanxi Provincial Government, and obtained the priority mining right. The exploration right of the exploration area was transferred to Shennan Mining. So far, it has not yet entered the development stage. In 2018, Daizen Coal Mine was approved with an annual production capacity of 15 million tons. 5 million tons, and it is expected to reach 20 million tons in 2023. The industry promotes the 276-day system, and the output of raw coal continues to decline. In the past 20 years, the output of raw coal has continued to increase from 1.55 billion tons to 3.974 billion tons in 2013. peaked in 2014, decreased in 2014-2016, increased production in 2017-2021, exceeded 2013 production in 2021, reaching 4.126 billion tons

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(5) The threshold of the industry continues to increase

The “Ningxia Hui Autonomous Region Mineral Resources Master Plan (2021-2025)” was approved by the Ministry of Natural Resources. The “Planning” determines the minimum production and construction scale and service life of the mine, and proposes the target of the mining scale and structure. Among them, it is clear that new open-pit coal mines are no longer approved; the minimum mining scale of new underground coal mines is not less than 600,000 tons/year, and the minimum service life is not less than 40 years; the existing coal mines with a mining scale of less than 600,000 tons/year are guided to gradually withdraw. By 2025, strive to achieve more than 85% of large and medium-sized coal mines

On August 26, the People’s Government of the Inner Mongolia Autonomous Region issued the “Overall Plan for Mineral Resources of the Inner Mongolia Autonomous Region (2021-2025)”, which clearly stated that the minimum mining scale of newly built mines should be increased, the access standards for newly built, renovated and expanded coal mines should be strictly enforced, and the principles of newly built underground coal mines should be strictly enforced. The upper production capacity is not less than 3 million tons/year, and the capacity after reconstruction and expansion of the coal mine is not less than 1.2 million tons/year

(6) The railway capacity has reached the limit, and it is difficult to improve in the future

Due to the limited railway capacity of Shaanxi Coal Industry, the proportion of long-term associations is maintained at about 50%, and the proportion of long-term associations of China Coal Energy is around 80%. On April 14, the Daqin Railway passed through the railway section of Jizhou District, Tianjin, and two trains crashed. collision. Daqin Railway is mainly responsible for passenger and freight transportation in Shanxi Province and some freight transportation tasks in Hebei, Beijing, Tianjin, Mongolia, Shaanxi and other provinces and cities. It accounts for one-third of the national railway coal transportation volume. The main users include major coal companies in the central and western regions, the four major power grids in the country, the five major power generation groups, the top ten steel companies, and tens of thousands of industrial and mining enterprises. The Daqin Railway will be overhauled in autumn. The sunroof time of the Daqin Line in September will be temporarily implemented according to the following plan: on September 2, 9, 16, and 23, 150 minutes of vertical comprehensive maintenance of the sunroof will be arranged every morning; on September 6, 14, 20, and 27 Arranged 120-minute vertical comprehensive maintenance of skylights in the early morning of each day, further limiting the capacity

High-quality coal mines are an important source of revenue for local governments

The shareholders of Shaanxi Xiaobaodang Mining are Shaanxi Coal Industry (60%) and Shaanxi Coalfield Geology Group (40%). The last major shareholder or sole shareholder of both is the Shaanxi Provincial Government, and the shareholder of Daize Coal Industry Company is China Coal Energy (80%), Yulin Caijin Investment Company (10%), Yuyang District Energy Investment Company (10%), behind the two minority shareholders are the Yulin Municipal Government and the Yuyang District Government of Yulin City. Reform, the shareholders behind high-quality coal mines are mostly local governments and central enterprises

Other sources of power generation are unstable

Hydropower will generate 1,214.03 billion kWh in 2020 and 11,840.2 in 2021, a year-on-year increase of -6.8%. Other sources of power generation other than thermal power and hydropower have increased, but the characteristics of power generation determine that its power generation is not stable, reliable, safe, and constructed. The cycle is long. The general construction cycle of hydropower is 8 years, and the construction cycle of nuclear power plants is 5 years.

predict

The energy structure will not change much in the next five years

my country is still a country rich in coal, poor in oil and less in gas. The resource endowment determines that my country still has to rely on coal mines for a long time. Under the background of current energy security, coal is still the main force of energy consumption in my country, and economic development must be supported by energy consumption. At a time when new energy has not yet achieved disruptive innovation, and the cost and stability of power generation are not as good as thermal power, it is necessary to increase coal consumption to support reasonable economic growth. In the “Sino-US Glasgow Joint Declaration”, China reiterated that coal consumption growth should be strictly controlled during the 14th Five-Year Plan period, and coal consumption should be gradually reduced during the 15th Five-Year Plan period. Reducing coal consumption must be in line with China’s national conditions and energy development stage.

Elasticity coefficient of electricity consumption

The elastic coefficients of electricity consumption in 2016-2020 are 1.12, 1.27, 0.78, 1.35, and the average value is 1.13. Take 1.13 as the average elastic coefficient of electricity consumption in 2021-2025. At the moment when the sales volume of new energy vehicles has made breakthroughs, this Predictions are conservative

In 2021, the electricity consumption of the whole society will be 8,312.8 billion kWh, a year-on-year increase of 10.3%. Under the assumption that the GDP growth rate will remain at 5%, the electricity consumption growth rate of the whole society will be 5.65%. The electricity consumption forecast of the whole society in 2025 will be approximately It is 10356.8 billion kWh, an increase of 2044 billion kWh compared with 2021

in conclusion

Coal consumption During the 14th Five-Year Plan (2021-2025), coal consumption will still maintain growth, and coal consumption will still account for more than half of energy consumption, which will buy time for the development of new energy. It is the main body of my country’s energy consumption. It still takes time to add new production capacity. During the 14th Five-Year Plan period, production capacity will not lead to oversupply. Carbon peaking in 2030 and carbon neutrality in 2050 will lead to more cautious capital expenditures in the industry. Leading coal enterprises China Shenhua has begun to prepare for the transformation. China Shenhua will use all the profits of the company to distribute dividends. Personally, it is speculated that it will be used for the new energy transformation of the group company (National Energy Investment Group). Shaanxi Coal Industry will invest part of the profits in other companies for financial transformation. China Coal Part of the profit retained by energy will be used for future business expansion of the coal industry. Different power generation characteristics determine that coal is the ballast stone for power generation in my country. To borrow a sentence from China Coal News: The coal industry is glorious and great, not a sunset industry.

Risks: New energy achieves subversive innovation China shale oil revolution has made breakthrough in controlled nuclear fusion technology $Shaanxi Coal Industry (SH601225)$ $China Coal Energy (SH601898)$ $China Shenhua (SH601088)$

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