Eager and enthusiastic

Thread Content

The long-dormant \"booming coal market\" scenario has reappeared. Analyses indicate that the commodity market has seen an overall recovery since the beginning of this year; coupled with a reduction in global mining supply, prices of non-ferrous metals have also started to rise from their lows ； In particular, coal prices rose rapidly in the third quarter, and the performance of some listed coal companies improved; this upward trend in coal prices is likely to continue. 　　“The “booming” market returns Recent months have seen continuous rises in the prices of commodities such as coal and non-ferrous metals. The long-dormant \"booming coal market\" scenario has reappeared. Yesterday, it was Shaanxi Black Cat in the coal sector. At the upper price limit, Jizhong Energy and Pingmei Shares reached that limit at one point during trading; China Shenhua, Lu’an Huaneng, Yunmei Energy, Xishan Coal Electricity, and Yangquan Coal Industry all saw increases of over 3%. 　　Among the companies in the non-ferrous metals sector, Yunnan Copper Co. hit its daily price limit; Jiangxi Copper Co., Xiye Shares, Jiaozuo Wanfang, Jianxin Mining, and Chihong Zinc-Germanium all saw increases of over 5%. Tongling Non-ferrous Metals, Zhongjin Lingnan, Xiye Shares, Yunaluminum Shares, and Zuye Group also recorded significant gains. 　　It is worth noting that commodities also staged a strong comeback yesterday; black-colored commodities continued to see sharp price increases. Among the key contracts, coking coal and coke both reached their upper price limits, with coking coal hitting a record high. Rebar prices rose by nearly 5%, while thermal coal prices increased by over 3%. Among non-ferrous metals, Shanghai tin hit its daily limit; Shanghai nickel rose by over 4%, while Shanghai copper rose by over 2%. 　　**Data released by the Bureau of Statistics show that in the first nine months of this year, the total profit of the coal mining and washing industry increased by 65.1% on a year-on-year basis, while that of the non-ferrous metal smelting and rolling industry rose by 33.2%. In the A-share market, among the third-quarter reports of coal and non-ferrous metals companies, 90% of these non-ferrous metals companies reported profits or expected profits, with most of them seeing an increase in net profits on a year-on-year basis. Industry experts analyze that since the beginning of this year, the commodity market has seen an overall recovery. Coupled with a reduction in global mining supply, prices of non-ferrous metals have also started to rise from their lows, which is beneficial for business operations. The rise accelerated especially in the third quarter, with the performance of some listed coal companies improving. 　　In the view of several industry professionals interviewed by Investment Express, coking coal is currently in short supply and relies heavily on imports, but stock prices have not yet fully reflected this situation ； Leading companies in this sector have reduced prices in the short term, but this does not help to balance supply and demand; meanwhile, the demand for coal during winter continues to rise ； Furthermore, capital operations such as mergers and reorganizations in this industry have not yet emerged on a large scale, and the trends in coal and non-ferrous metals are expected to continue. 　　Huatai Securities states that \"imported inflation\" resulting from rising raw material prices and a weakening currency has, to some extent, raised current market expectations regarding inflation; these expectations in turn increase the value of commodity investments from the perspective of asset allocation. From the perspective of the real economy, economic data in Europe and the United States continue to show improvement. In China, GDP grew by 6.7% on a year-on-year basis in the third quarter, indicating positive trends in the economy, and the risk of price declines has been alleviated. 　　Coal: Improving performance drives strength in this sector. Recent coal prices have shown an accelerating upward trend; the latest Bohai Rim thermal coal price index as of November 2 stood at 607 yuan per ton, setting another record high for the year. Since late September, the cumulative price increases for three futures products – thermal coal, coking coal, and coke – have exceeded 30%, 60%, and 70% respectively, leading the industry to exclaim that \"coal prices are completely crazy\"! 　　Since the beginning of this year, coal prices have shown an upward trend; last week, the main contract for thermal coal futures closed at 661 yuan, representing a increase of 5.15% for that week ； The main contracts for coking coal and coke closed at 1,405.5 yuan and 1,910.5 yuan respectively, with weekly increases of 7.5% and 8.71% respectively. In addition, driven by rising domestic coal prices, international coal prices increased on a week-on-week basis last week. The prices of thermal coal in the three key regions all exceeded 80 dollars per ton, with the Newcastle index in Australia even breaking through 100 dollars, indicating a significant rise in international thermal coal prices. Analyses suggest that driven by seasonal demand and the expected rise in coal prices, power plants are becoming more active in their purchasing, leading to a significant increase in coal demand; as a result, coal prices are likely to continue rising strongly in the short term. 　　Liu Zhaoliang, an analyst at Zhongtai Securities, said that the National Development and Reform Commission held a meeting to urge coal companies to regulate their prices. Leading coal companies such as Shenhua, China Coal, Shaanxi Coal, and Yitai voluntarily reduced their coal prices by 10 yuan per ton. This has served as a good example in helping to curb excessive price increases for coal, and it also facilitates orderly production in downstream industries. However, it still takes time for the current increased production capacity to take effect; coal storage at transfer stations and at end-users (especially coking coal) remains at very low levels, supply remains tight, and there is still room for coal prices to rise. 　　Driven by the recovery in coal prices, the performance of listed coal companies has also improved overall. Those coal firms that were operating at a loss due to low coal prices have managed to turn a profit thanks to this rise in prices. According to data from Tonghuashun, four listed companies—Jinrui Mining, China Coal Energy, Hongyang Energy, and *ST Xinji—have already announced that they expect to turn a profit in 2016. 　　According to a report by Haitong Securities, 81% of coal-related listed companies achieved profits in the third quarter of 2016, with their net profits after deducting non-recurring items increasing by 48% on a quarter-on-quarter basis. With a reversal in supply and demand dynamics and a rapid rise in coal prices, the main operating revenues and costs of major listed companies increased by 47% and 9% on a quarter-on-quarter basis in the third quarter. Among the 27 sample companies, 5 recorded losses in net profit during the third quarter of 2016, a figure that is better than the 16 companies that suffered losses in the third quarter of 2015 and the 8 companies that did so in the second quarter of 2016; there was a significant improvement both on a year-on-year and quarter-on-quarter basis. 　　Haitong Securities believes that although a series of measures have been taken to regulate production capacity in order to increase supply, the release of capacity in the short term may not meet expectations, and the effect of increased supply will be limited. Given that the peak season for coal consumption comes in the fourth quarter starting in November, it is estimated that daily coal consumption in November will be 1 million tons higher than in September. Although changes in coal production capacity growth need to be monitored, since stock prices have risen far less than coal prices, coal stocks should remain a promising investment in the long term, even if coal prices change. 　　CITIC Construction Investment stated that driven by factors such as inventory replenishment during peak seasons, state-owned enterprise reforms and restructuring, and the reversal of previously pessimistic expectations regarding policies, stocks related to such reforms and restructuring, represented by Pingzhuang Energy, *ST Xinji, and China Coal Energy, were among the first to see price increases. Companies with low price-to-book ratios that had not seen significant gains earlier, such as China Coal Energy, Lu’an Environment, Yangquan Coal Industry, Jizhong Energy, and Hengyuan Coal & Electricity, also performed well in this market trend, contributing to a strong rise in the coal sector. It appears that, supported by the winter storage trend and improving corporate profits, the valuation recovery of coal stocks is likely to continue. 　　Individual Stock Review: China Shenhua. China Shenhua is currently the largest coal production company in China. Its integrated business model and cost advantages enable it to effectively withstand the cyclical fluctuations in the industry. According to the company’s financial reports, thanks to its low costs and transportation advantages, it has managed to maintain its leading position even as the industry faced a downturn. 　　CICC notes that China Shenhua is a winner of this round of supply-side reforms, and the company’s profits over the next one to two years will benefit from rising coal prices as well as recent policies aimed at increasing production capacity in advanced facilities. Even under the scenario where the average coal price drops back to 500 yuan per ton in 2017, the company can still achieve an return on equity of 9.1% and a return on free cash flow of 12% next year. Maintain the company’s recommended rating. 　　Xishan Coal and Electricity is a key coking coal producer under Shanxi Coking Coal Group, the leading company in the country’s coking coal industry. It currently has 6 production mines with an approved capacity of 29.3 million tons. There are also 6 mines that are part of resource integration projects but not yet in operation, with a capacity of 4.5 million tons. Additionally, 2 new mines are planned to be built, with a combined capacity of 7 million tons. According to analyses, the company’s raw coal production in 2015 was 27.88 million tons, with 12.9 million tons of refined coal produced, giving a purification rate of 46%, which is ahead of the industry average. The net profit per ton of coal was 5.4 yuan, a relatively high figure among coal-related listed companies. 　　Changjiang Securities stated that the company is a leader in the coal industry, and with Jiaomei Group – China’s largest producer of coking coal – as its backing, the closure of mines as part of the industry’s supply-side reform is unlikely to have a significant impact on the company. However, it will continue to benefit from cost reductions resulting from the reallocation of employees and the settlement of debts. The coal sector is highly homogeneous, but companies in this sector are among the preferred targets for opportunistic deals as well as future trend-driven opportunities. 　　Colored metals: A bullish atmosphere prevails in the market. Recently, the Ministry of Industry and Information Technology released the development plan for the colored metals industry (2016–2020). The Plan outlines 8 key tasks, including driving innovation, accelerating industrial structure adjustment, vigorously developing high-end materials, promoting green and sustainable development, enhancing resource supply capacity, advancing the deep integration of industry and information technology, actively expanding application areas, and deepening international cooperation. It also lists 7 key areas for development and 4 key projects in dedicated sections. 　　Last week, the prices of basic metals rose both on the domestic and international markets; specifically, the spot price of copper on the Yangtze River increased by 2.1%, while the spot price of zinc on the Yangtze River rose by 3%. The price of electrolytic aluminum has stabilized above 13,000 yuan per ton, and driven by the rising aluminum prices, magnesium prices have also begun to increase. On November 4, Glencore announced that its zinc production in the third quarter was 282,700 tons, a 30% decline year-on-year but a 13% increase quarter-on-quarter, in line with market expectations of reduced production by Glencore. 　　Analysts at Dongxing Securities noted that in October, both the official manufacturing PMI and the Caixin manufacturing PMI showed signs of improvement, indicating that the overall domestic economy continued to stabilize. This boosted market sentiment, allowing the accumulated bullish momentum to be released; metals such as steel and coal further drove market activity, with the SMMI rising by 1.21% last week. However, with the final decisions in the U.S. election approaching, market uncertainty is rising, and the dollar is likely to remain under pressure. It is expected that most basic metals will remain in an upward trend, pushing towards new high levels, with a bullish atmosphere prevailing in the market. 　　“With the continuous rise in commodity prices, **positive policy measures, and improving earnings results for the third quarter, the non-ferrous metals sector has entered a phase of recovery in stock indices, and stocks in related sectors are likely to perform well. ”Analysts point out that the sharp rise in commodity prices is primarily driven by demand. Recent economic data from China have been positive, and expectations of an economic recovery continue to be confirmed. The improvement in the manufacturing sector will strongly support the demand for industrial raw materials, including basic metals. 　　Everbright Securities notes that the improvement in profits of non-ferrous metals companies will continue to increase in the third and fourth quarters. For the short term, it is recommended to focus on stocks that are at relatively low stock prices and whose performance in the third and fourth quarters is expected to exceed expectations. On the other hand, based on an analysis of the price elasticity of metals, it is recommended to pay attention to tin, zirconium, and tungsten, whose current prices are still below their costs, while supply and demand conditions continue to improve. 　　Regarding individual stocks, the market suggests keeping an eye on category two non-ferrous metal stocks. First are the varieties with relatively optimistic downstream demand. Take lithium battery-related stocks as an example: there is strong demand for non-ferrous metals such as lithium ore and cobalt, which drives up the prices of these commodities. Such stocks have a solid industrial foundation, and therefore their performance elasticity and stock price volatility are worth looking forward to. The second category consists of stocks related to the concept of \"urban mines\" – namely those involved in industries related to the circular economy and urban resource recycling, such as GEM Inc. and Tianqi Co., Ltd. These companies deal with the processing of solid waste, including vehicle dismantling, and they recover large amounts of non-ferrous metals, as well as metals with high market demand such as gold and cobalt. 　　Individual Stock Spotlight: Yunnan Copper Industry
The company has recently released a plan for a private placement; it intends to issue up to 872 million shares at a price of no less than 9.31 yuan per share to no more than 10 investors, including Yunnan Copper Group, Yunnan Gold, and Diqing Prefecture Investment. The total amount of funds raised will be no more than 8.122 billion yuan. The aim is to increase the company’s copper smelting capacity, phase out outdated production facilities, and expand its presence in the southeastern coastal markets. 　　According to analyses, following this issuance, the company’s existing copper smelting capacity will increase significantly, which will help it eliminate outdated production facilities and improve the technology level of its smelting processes. At the same time, it will facilitate the implementation of its \"north-south strategy\" to further expand its market reach. Furthermore, through this private stock issuance, the company will complete the acquisition of the shares in Diqing Non-ferrous Metals held by its controlling shareholder, thereby further resolving the issue of competition in the same industry between the company and its controlling shareholder, which is beneficial to the company’s future development. 　　Yunal Co., Ltd. has completed the integration of upstream alumina resources, and it is expected that by 2019 the company’s self-sufficiency rate in alumina will reach 100%. At present, the 800,000-ton alumina production capacity of Phase I in Wenshan is fully operational, while the 600,000-ton alumina production capacity of Phase II in Wenshan is about to come online. The 1 million-ton alumina project of Laos Aluminum is expected to start operations in 2019; once that happens, the company’s electrolytic aluminum production costs will no longer be affected by fluctuations in alumina prices. On the other hand, thanks to Yunnan Province’s abundant hydropower resources, Yunaluminum’s electricity costs have continued to decline, further enhancing its profitability. 　　The analysis indicates that the company is pursuing development in the areas of deep alloying and alloy material development, focusing on new types of aluminum products for use in sectors such as transportation, construction, power generation, packaging, and new energy. By attracting downstream industries to cluster around the company’s hydroelectric and aluminum resources, it aims to accelerate the creation of an innovation park for advanced aluminum processing in the Kunming area, thereby enhancing its competitive advantages through differentiation. The company’s future prospects are promising. http://www.100ppi.com/forecast/detail-20161108-112390.html (Article source: Investment Express)