As summer heatwaves spread across the country, peak season coal prices have a solid foundation for support, with a bottoming and recovery expected around mid-July. While short-term price corrections have occurred due to rainfall and inventory accumulation, analysts note the medium-to-long-term tight supply-demand balance remains unchanged. The annual average coal price is projected to be higher year-on-year. High-quality coal companies maintain stable attributes of strong profitability, robust cash flow, and high dividends. Following recent adjustments, sector valuations are now at reasonable to slightly low levels.
Data shows that last week, the price of Q5500 thermal coal at Qinhuangdao Port fell to 816 yuan per ton, a decrease of 30 yuan per ton week-on-week. The pithead price in Yulin, Shaanxi, was 745 yuan per ton, down 10 yuan per ton week-on-week. For coking coal, the price of primary coking coal at Jingtang Port was 2,130 yuan per ton, a drop of 30 yuan per ton week-on-week. Daily coal consumption in eight coastal provinces and seventeen inland provinces increased by 3.24% and 8.01% week-on-week, respectively. Although inventories rose, the number of days of available supply decreased. The capacity utilization rate of thermal coal mines climbed to 87.8%.
Key Drivers for a Rebound
On the demand side, electricity consumption is entering its peak period as temperatures rise. A significant improvement in nationwide temperatures indicates a fundamental inflection point is imminent. The China Meteorological Administration's climate trend briefing on July 4th forecasted four waves of high-temperature weather across the country in July, occurring from July 3-8, July 10-16, July 18-22, and July 25-28. The first wave in the north (July 3-8) is expected to be the most extensive and intense this year. With eastern China exiting the rainy season around mid-July, the nation will fully enter summer, meaning this year's peak summer electricity demand, though delayed, is not absent.
On the supply side, Shanxi's raw coal production from January to May 2026 was 536 million tons, a slight year-on-year decrease of 1.2%. Tightened safety regulations are continuously weakening supply elasticity. Coking coal supply has contracted more noticeably due to province-wide mine shutdowns and rectifications following accidents. Coal prices are expected to show a trend of initial stability followed by strength, with structural divergence, and coking coal price increases are likely to be significantly ahead.
Analyst Perspectives on Supply and Demand
Analysts point out that the impact of safety inspections on supply is just beginning. After June, the market anticipated a rapid recovery in production to pre-accident levels as Shanxi resumed operations. However, based on in-depth market research and discussions with leading companies, this view is considered overly optimistic. Safety inspection efforts in Shanxi have even intensified since late June, with optimistic expectations capping capacity utilization at 100%. Furthermore, referencing CHINA SHENHUA's (HKEX: 01088) 4.1% year-on-year production decline in May (despite having minimal capacity in Shanxi) reflects the nationwide impact of this regulatory round. The stringent control stance is expected to persist in the second half of the year, continually reinforcing the logic of coking coal supply contraction and providing solid support for coal prices. Once peak season demand returns, the supply-demand imbalance will immediately manifest, accelerating the market recovery.
Another securities firm notes that current thermal and coking coal prices are still at historically low levels, providing room for a rebound. As supply-side "overproduction inspection" policies drive output contraction and demand enters the peak heating season, the fundamental supply-demand dynamics for coal are expected to continuously improve, with both thermal and coking coal possessing upward elasticity.
Broader Energy Context and Investment View
Additionally, the flourishing AI ecosystem is opening new avenues for electricity consumption. The inclusion of "computing-power and electricity coordination" in the government work report provides robust support for China's electricity demand, potentially further highlighting coal's role as the "ballast of energy security." Analysts at Morgan Stanley highlight that the AI era is elevating "energy security" to one of the most important global capital expenditure themes for the next decade, with electricity becoming an indispensable component of AI competition.
Overall, the underlying logic of coal capacity shortage remains intact, and the trend of a price floor being established is unchanged. Following the recent pullback, the sector now demonstrates relatively high allocation value. Focus is on the unfolding peak summer demand scenario and subsequent valuation repair opportunities. It is recommended to monitor coal stocks with stable operations and significant earnings potential.
Notable Companies in the Sector
YANKUANG ENERGY (HKEX: 01171): In Q1 2026, the group achieved operating revenue of 34.589 billion yuan, a year-on-year increase of 1.83%. Net profit attributable to shareholders was 3.955 billion yuan, up 42.14% year-on-year.
CHINA SHENHUA (HKEX: 01088): In May 2026, commercial coal production was 41.7 million tons, down 4.1% year-on-year. Coal sales volume was 50.5 million tons, up 11.7% year-on-year. For the January-May period, commercial coal production was 207 million tons, down 4.0% year-on-year, while coal sales were 249.7 million tons, up 3.3% year-on-year.
CHINA COAL (HKEX: 01898): The company announced that in May 2026, commercial coal production was 10.81 million tons, down 9.2% year-on-year. Commercial coal sales were 21.87 million tons, up 0.4% year-on-year. For the first five months of 2026, commercial coal production was 51 million tons, down 9.4% year-on-year, and sales were 98.31 million tons, down 8.1% year-on-year.
YANCOAL AUS (HKEX: 03668): As the Australian coal operating platform for Yankuang Energy Group, it has developed into a leading coal producer in eastern Australia, excelling in both cost and production. It is Australia's largest pure-play coal producer, with equity commercial coal production accounting for 8.7% of Australia's total output in 2025.
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