Zheshang Securities released a research report stating that in 2025, coal supply exhibited a high-then-low trend, with imports declining year-on-year, while demand remained resilient. Supported by stricter oversight on overproduction, coal prices saw a V-shaped rebound. Looking ahead to 2026, domestic economic stability is expected to sustain demand growth, while supply will balance between production restrictions and supply guarantees, leading to a higher coal price floor.
Supply and demand determine inventory levels, which in turn influence prices. The bank predicts 2026 inventories will fall between 2024 and 2025 levels, with thermal coal averaging RMB 800–850/ton. Given weaker demand from the steel sector for coking coal and potential supply increases, the coking-to-thermal coal price ratio is expected at around 2x, translating to an average coking coal price of RMB 1,500–1,700/ton. If destocking exceeds expectations, coal prices may rise further. The firm maintains an "Overweight" rating on the sector.
**2025 Recap** **Supply**: Production was front-loaded, with growth turning negative later. From January to October 2025, China’s raw coal output reached 3.973 billion tons (+1.5% YoY), peaking in H1 before declining in July–October. Coal imports fell 11% YoY to 388 million tons, with monthly declines starting March. Xinjiang coal outbound shipments remained steady at 85.18 million tons (+6.4% YoY).
**Demand**: Consumption rebounded after an initial dip, showing overall resilience. Total commercial coal consumption reached ~4.24 billion tons (+0.1% YoY), driven by strong chemical and steel sector demand. By sector: chemical coal use rose 10.9% YoY to 360 million tons; steel coal edged up 0.2% to 590 million tons; building materials coal fell 4.9% to 400 million tons; power coal dipped 1.1% to 2.35 billion tons.
**Prices**: Coal prices rebounded in a V-shape. Thermal, coking, and anthracite coal opened 2025 at RMB 767, 1,520, and 980/ton, respectively, bottoming at RMB 609, 1,230, and 820/ton before recovering to RMB 816, 1,670, and 930/ton by November 28. Long-term contract prices for 5,500 kcal thermal coal at Qinhuangdao Port adjusted from RMB 693/ton at year-start to a low of RMB 666/ton in July, then rebounding to RMB 684/ton by November.
**2026 Outlook** **Policy**: Production caps and supply guarantees will seek equilibrium. Mid-year overproduction curbs aim for orderly supply, while winter energy security policies stabilize output. Capacity replacement rules may limit expansion. The 15th Five-Year Plan emphasizes a new energy system, with coal as a backup. Coal consumption for power peaking may rise.
**Market**: Inventory dynamics will dictate prices. Drawing parallels to U.S. natural gas trends, coal inventory relative to its 5-year average can guide price forecasts.
**Forecast**: Coal demand is projected at 4.95 billion tons (+1% YoY), led by power and chemical sectors, while steel and building materials demand may dip slightly. Output is expected at 4.87 billion tons (+0.6% YoY). With demand growth outpacing supply, the price floor is likely to rise.
**Risks**: Global economic slowdown; supply surges; renewable substitution; safety incidents; policy shifts.
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