Shanxi Securities Company Limited has reported that coal prices experienced fluctuations in early September due to significant events. However, as supply and demand normalized, coal prices rebounded to varying degrees, resulting in relatively stable price performance throughout the month. Specifically, thermal coal prices showed greater stability, while coking coal saw stronger pig iron production with larger price swings.
With policies aimed at reversing the “involution” trend, domestic raw coal production has contracted. Although the contraction trend continued to ease in September, output remains relatively controlled following the implementation of related policies. During the peak summer season, coal prices increased unexpectedly; however, some long-term contracts still failed to materialize, indicating that sales recovery may persist into the fourth quarter.
Key insights from Shanxi Securities include the following:
Supply: The marginal decrease in raw coal supply from January to September. In 2025, coal production totaled 3.570 billion tons, representing a year-on-year increase of 2.0%, but the growth rate is slowing. In September, production was 412 million tons, down 1.8% year-on-year but up 5.38% month-on-month.
Demand: Terminal demand from January to September was supported by manufacturing and infrastructure. Fixed asset investment from January to September 2025 decreased by 0.5% year-on-year, with manufacturing investment up by 4.0%, infrastructure investment up by 1.1%, and real estate investment down by 13.9%. The cumulative growth rate for thermal power from January to September was -1.2%; coking coal recorded a cumulative growth of 3.5%; pig iron saw a -1.1% growth rate; cement posted a -5.2% increase. In September, thermal power growth was -5.4%; coking coal grew by 8.0%; pig iron decreased by -2.4%; and cement dropped by -8.6%.
Imports: Coal imports saw a month-on-month increase in September, but the overall trend from January to September remained a contraction. Total imports for January to September 2025 reached 346 million tons, down 11.1% year-on-year, with September imports at 46 million tons, which is a 3.34% decline year-on-year but a 7.64% month-on-month increase.
Prices: Coal prices rose steadily in September, while coking coal prices fell slightly. Although prices of Shanxi mixed 5500 thermal coal, Jing Tang Port primary coking coal, and Tianjin Port secondary metallurgical coke have fluctuated since 2025, September witnessed a divergence among the three average price categories. The month-on-month increase for September ranked as: thermal coal > coking coal > coke. Throughout September, coal prices remained relatively stable.
As domestic supply continues to contract, the elasticity of imported coal is contributing. Following the policy shift aimed at reversing involution, domestic raw coal production is contained. This unexpected increase in coal prices has also stimulated demand for imports, leading to a continued rise in imported coal in September. If coal prices stabilize and rebound in the future, import demand may persist.
Investment Recommendation: We are optimistic about investment opportunities in the coal sector for Q4, particularly for coal with elastic varieties ranking higher. Performance in Q4 may surpass that of Q3, indicating that the sector has allocation value. During the peak summer season, coal prices increased unexpectedly; however, the lingering effects of long-term contracts have led to ongoing sales recovery into Q4. With limited expectations for domestic coal supply increases coinciding with the winter peak, there are downward supports for prices. Demand is expected to rise in Q4, with average prices anticipated to stabilize somewhat on a month-on-month basis.
On the targeted stocks front, the current overall valuation of the sector is relatively low, with increased needs for a shift in market style, suggesting that coal has the potential for rebound. Therefore, buying on dips is advisable, with a focus on elastic varieties. Recommended stocks include Jinkong Coal Industry (601001.SH), Shanxi Coal International (600546.SH), and Huayang Company (600348.SH). In terms of coking coal, the demand expectations for September and October remain strong; should there be any supply disruptions, prices could rebound unexpectedly. Notable mentions include Lu’an Environmental Energy (601699.SH) and Shanxi Coking Coal (000983.SZ).
Risk Warning: Risks include supply contraction falling short of expectations, demand recovery not meeting forecasts, significant increases in imported coal, and related companies' performance not aligning with expectations.
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