CITIC SEC has released a research report stating that coal-listed companies are experiencing rapid earnings improvement. With seasonal catalysts still in play, the sector is in the midst of a fresh rebound. The report anticipates that coking coal and anthracite companies may exhibit greater earnings growth elasticity. While coal prices have shown some short-term weakness, the firm remains optimistic about the upward price effect driven by peak season factors.
Against a backdrop of supply contraction, it is forecast that supply-demand dynamics will continue to improve in Q3, which should benefit coal prices and support further sequential growth in sector earnings. The bank judges the sector is currently in a new round of rebound and recommends companies with strong earnings elasticity and those within the metallurgical coal segment that offer relatively attractive valuations.
Current sector performance is at a low point for the year, and subsequent fundamental improvements are expected to further propel the rebound. The report continues to recommend thermal coal companies with good earnings elasticity and metallurgical coal firms with low price-to-book (P/B) ratios. The main points from CITIC SEC are as follows:
In Q2 2026, coal prices rose both year-on-year and sequentially, with spot market prices diverging from annual contract prices. Due to sustained strong industry demand, average prices for various coal types generally increased in Q2 2026. The average spot price for thermal coal rose approximately 14% sequentially and nearly 28% year-on-year. In contrast, annual contract prices at ports increased only 1% sequentially and 2% year-on-year.
Anthracite average prices rose about 12% sequentially and 5% year-on-year. Metallurgical coal prices increased around 9% sequentially and nearly 33% year-on-year. For the sample of listed companies tracked, Q2 2026 net profit is estimated to have risen 31% sequentially.
For the first half of 2026, net profit is projected to be up 19% year-on-year. Data from the National Bureau of Statistics shows that in the first five months of 2026, China's large-scale coal mining and washing industry achieved a cumulative total profit of 1,689 billion yuan, a year-on-year increase of 33.5%. This suggests the earnings growth of the tracked listed companies for H1 2026 may be below the industry average.
Breaking it down by sub-sector, the bank estimates the aggregated net profit for the thermal coal, metallurgical coal, and anthracite segments in H1 2026 increased by 18%, 30%, and 39% year-on-year, respectively.
Outlook for Q3 2026 Fundamentals
The supply contraction is expected to persist, potentially leading to a continued upward shift in the coal price center. Domestic coal output has lacked elasticity this year. Following a mining accident in Shanxi in late May 2026, safety inspections have become stricter again, suppressing production releases. This policy effect is anticipated to be sustained.
On the demand side, thermal power demand has exceeded expectations this year, and coal consumption for chemical production remains high. Given that most of Q3 2026 falls within the summer peak season, and against the supply contraction backdrop, the industry's supply-demand balance is expected to continue improving. The average price center is likely to shift upward sequentially, favoring further earnings improvement for the sector.
Risk Factors
Key risks include a potential systematic decline in international coal prices due to easing geopolitical conflicts or overseas coal production cuts falling short of expectations. Other risks are supply increases resulting from weaker-than-expected implementation of supply contraction policies or a relaxation of safety inspections. Additional pressures could arise from an accelerated adjustment in the energy structure, intensified energy conservation and carbon reduction efforts affecting coal consumption, and weather-related disruptions impacting coal price expectations.
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