Shanxi Securities released a research report expressing optimism about investment opportunities in the coal sector for the fourth quarter. The "anti-involution" policy aims to maintain reasonable industry profits, providing a floor for coal prices with expectations of sustained high levels. As winter demand peaks in Q4, coal prices are expected to remain strong, with performance likely surpassing Q3, making the sector attractive for allocation. If prices stay elevated, 2026 earnings could see significant upside.
Key insights from Shanxi Securities include: - **Import Volume & Pricing Trends**: Coal imports from January to October fell 11.0% YoY, continuing a contraction trend. While October imports dropped 9.75% YoY and 9.26% MoM, the decline has slowed for eight consecutive months. All coal varieties saw MoM declines, with thermal coal and lignite posting sharper reductions. - **Thermal coal**: Lower imports from Mongolia and Indonesia drove the decline. - **Coking coal**: Reduced shipments from Mongolia were the primary factor. - **Lignite**: Indonesia’s export cuts contributed significantly. - **Anthracite**: Russia led the decrease. - **Pricing**: The average import price in October rose to $71/ton, up $3.65 MoM but still lower YoY. While all coal types saw MoM price increases, thermal and coking coal posted relatively larger gains.
**Why Did Domestic Coal Prices Rise Unexpectedly While Imports Fell?** October’s import drop was led by thermal coal and lignite, reflecting reduced shipments from Mongolia and Indonesia. Mongolia’s export decline stemmed from: 1. A 7-day border closure during China’s National Day, cutting effective customs clearance days. 2. Political turmoil in Mongolia, including a failed attempt to oust the Prime Minister, which delayed long-term transport agreements with China. 3. Operational challenges at key mines like Tavan Tolgoi, reducing output.
In Indonesia, monsoon disruptions tightened supply, raising low-calorie coal prices. Chinese power plants prioritized domestic long-term contracts, dampening demand for Indonesian coal. However, if weather conditions worsen, Indonesian imports could rebound.
**Outlook for Mongolian Coal Imports** On November 18, 2025, Mongolia’s Prime Minister reiterated a target of 100 million tons of coal exports to China during a meeting in Moscow. With exports at 69.68 million tons in the first 10 months (annualized: 83.62 million tons), achieving the goal by 2026 remains challenging but provides directional guidance.
**Risks**: Weaker-than-expected domestic demand, a surge in local supply, or a sharp drop in global coal prices could weigh on the sector.
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