Shanxi Coking Industry Research Report

Shanxi is a major coal province in China, and is also the largest province for coke production. The capacity of coking enterprises in Shanxi Province exceeds 110 million tons and there are more than 160 enterprises, 28 of which have a production capacity of over 1 million tons per year. They are mainly distributed in Luliang, Linfen, Taiyuan, Jinzhong, Changzhi and Yuncheng. Eight major coking industrial areas and 15 key coke producing counties. Due to the large production capacity of coke and the large number of companies in Shanxi, we chose Shanxi as the research destination and selected two larger companies as the main research objects.

I. Basic situation of Shanxi coke industry In 2012, due to the large coke production capacity and the slowdown in external demand, the average capacity utilization rate of Shanxi Coking Industry was only 50%-60%. At present, Shanxi coke industry presents two characteristics: 1. Shanxi's coke market share continued to decline, with monthly production continuing to decline year-on-year. As of October 2012, the cumulative production of coke in Shanxi Province was 70.917 million tons, a year-on-year decrease of 6.45%, and its market share fell to 19.02%, but it still ranked first in the country. 2. Demand from other provinces has fallen sharply. Shanxi's main consumption areas for coke are Hebei, Shandong and Jiangsu provinces. As can be seen from Table 1, from January to August of 2012, Hebei produced 142.298 million tons of pig iron, an increase of 4.84%; coke production was 56.743 million tons, an increase of 7.91. Shandong pig iron production was 50.260 million tons, an increase of 4.88% year-on-year; coke production was 34.061 million tons, an increase of 2.24% year-on-year. Jiangsu pig iron production was 48.863 million tons, an increase of 6.20% year-on-year; coke production was 16.914 million tons, an increase of 17.96% year-on-year. In addition to the slight increase in demand for coke in Shandong, the demand for coke in Hebei and Jiangsu has dropped significantly. Although this year, the demand from other provinces has fallen even more, resulting in an increase in surplus production.

Second, the basic situation of research companies:

1. Shanxi Datuhe Coking Co., Ltd., established in 2002, has 25 subsidiaries, 5 wholly-owned coal subsidiaries, 6 other subsidiaries, 3 associates, and more than 10,000 employees.

Raw coal production capacity: 6.3 million tons/year;

Coal preparation capacity: 5.2 million tons/year;

Coke production capacity: 2.4 million tons/year.

2. Shanxi Sunshine Coking Group Co., Ltd. was formally established in 1992 and has 9 economic entities. It is a large-scale coking enterprise that integrates coal mining, coking, chemical engineering, power generation, and material trade. It is established by the provincial government as three major squares. One of the companies, more than 5,000 employees.

Raw coal production capacity: 8 million tons/year;

Coal preparation capacity: 8 million tons/year;

Coking capacity: 5 million tons/year.

Third, the recent production and inventory situation of the enterprise 1. Shanxi Datuhe Coking Co., Ltd. from the beginning of October to mid-November, the total start-up time of the company is less than 2 weeks.

2. Shanxi Sun Coking Group from early October to mid-November, the operating rate of the company is about 20%.

According to our understanding, from October to mid-November, to ensure safety, the operating rate of most coke enterprises in the Shanxi region is generally not high. In addition, iron and steel enterprises make up the library operations, coke enterprises ship very smoothly, and the company’s inventory is generally low, even quite a few. The company is in zero inventory. This provides a certain basis for the firmness of coke prices.

Fourth, coke prices 1. Shanxi Datuhe Coking Co., Ltd. has raised the factory prices three times in a row since November. The current factory price runs above cost.

2. Shanxi Sunshine Coking Group raised the ex-factory prices twice since November. The current factory price runs above cost. According to our understanding, due to the recent rebound in coke prices, it has generally risen by 150-200 yuan/ton, and corporate profits have improved. At present, the price of primary metallurgical coke in Shanxi is relatively stable, with a main range of 1500-1550 yuan/ton (including tax). In addition, most companies coke late price movements are more optimistic, due to the scarcity of coke in winter, do not rule out the possibility of coke prices again in December may be raised; due to the recent weaker coke prices, some companies are more tangled trend of the market outlook, Continuing to increase the confidence in the offer is slightly insufficient.

From the beginning of October to mid-November, the price of coking coal pits in Shanxi Province started to rebound, and the cost of coke production increased. In addition, the coke enterprises generally have low stocks, making the continuous rise in the price of coke in the near future inevitable. At present, the North has entered the winter. From the perspective of scarcity of coal, there is basically no possibility of lower coking coal during the year, and there is a certain cost support for coke prices in the market.

V. Export Situation Shanxi is a major province of coke production and a major exporter. The number of export enterprises and the number of export quotas account for more than 60%. In 2012, the total amount of coke export quotas was 9 million tons. The quota of 500,000 tons of border trade issued to the Xinjiang Autonomous Region and the BINGTUAN was deducted (300,000 tons for the autonomous region and 200,000 tons for the BINGTUAN, which was used to encourage the export of real estate products in Xinjiang), and the other province's border trade export quota was 20,751 tons, with the remaining 8.479249 million tons. The first batch has been issued 4.23925 million tons, and the remaining number of second batches issued 4.23924 million tons.

1. Shanxi Datuhe Coking Co., Ltd., prior to 2007, mainly exported overseas.

In 2012, the export quota was 256865.6 tons. About 20% of annual production.

2. Shanxi Sunshine Coking Group has export business.

In 2012, the export quota of Shanxi Coke Group International Trading Co., Ltd. was 67,1050.5 tons.

In addition, as far as we know, most companies have indicated that they will actively explore overseas markets and broaden their sales channels next year, but at the same time they will have to depend on the adjustment of export tariffs next year and the number of export quotas of their own companies. In addition, once the export tariffs are lowered next year, the export volume of coke will increase, and the company’s performance will increase to a certain extent, but it will be difficult to make substantive improvements. Therefore, most companies indicate that they will focus on domestic users next year and take into account overseas customers. On January 30, 2012, the WTO ruled again on the case of China restricting the export of nine kinds of raw materials: to maintain the core penalty for the ruling of early July last year, that is to say, “China’s implementation of export taxes and export quotas on raw materials for the steel and chemical industries violated The rules of international trade must be corrected." Because of this, we believe that in 2013, the export tariff of coke will be more likely to be lowered, and the export of coke will be expected to resume growth. If we can achieve half of the export volume in 2008 (see Figure 5), about 6 million tons, for some coke enterprises, the performance will certainly improve, but relative to the remaining output of 50 million tons per year, it is difficult to reverse the overall situation.

VI. Investment Strategy After investigating the above two companies and visiting the surrounding markets, we believe that the current inventory of Shanxi coke enterprises is not high, the price of coking coal and coke rises, and the expectation of coke export tariff reduction is the recent rebound in coke prices. The main driving force also closed the coke drop in space during the year. J1305 contract price has a strong support within the range of 1450-1500. This interval is dominated by dips. However, on the other hand, low domestic and international macroeconomic conditions and the overcapacity situation in Shanxi are difficult to reverse in the short term, which also limits their significant upside. The j1305 contract price is within the range of 1600-1650, and the resistance is greater. Vent mainly.