Minsheng Securities: Current coal prices are at the junction of off-peak and peak seasons, and are expected to continue the off-peak rising trend in the second half of the year

According to the Zhitong Finance APP, Minsheng Securities released a research report stating that in the first half of 2025, the price of thermal coal continued to decline, with the average price in 25H1 being 675.7 yuan/ton, a year-on-year decrease of 22.8%. After entering July, the peak summer demand surged, coupled with a contraction in supply, which helped coal prices rebound from 609 yuan/ton in late June to 704 yuan/ton in late August. Currently, coal prices are at the junction of the off-peak and peak seasons, with traders showing low purchasing sentiment. It is expected that coal prices may maintain slight fluctuations in the next one to two weeks, but with port inventories continuing to decline and supply continuing to contract under the policy of checking overproduction, the fundamentals will continue to improve, and coal prices will once again enter an upward channel, likely extending the upward trend into the off-season, returning to the level of 24Q3.

The main views of Minsheng Securities are as follows:

Market Review: 25H1 Thermal Coal Prices Continued to Decline

In the first half of 2025, thermal coal prices continued to decline, with the average price in 25H1 being 675.7 yuan/ton, a year-on-year decrease of 22.8%. 25Q2 marked the bottom for thermal coal prices, with an average price of 631.6 yuan/ton, a year-on-year decrease of 25.6%, and a quarter-on-quarter decrease of 12.43% from 25Q1. After entering July, the peak summer demand surged, coupled with a contraction in supply, which helped coal prices rebound from 609 yuan/ton in late June to 704 yuan/ton in late August. In 25H1, the average price of premium coking coal at Jing Tang Port was 1377.67 yuan/ton, a year-on-year decrease of 38.79%; the average price of first-grade metallurgical coke at Tianjin Port was 1528.83 yuan/ton, a year-on-year decrease of 29.79%.

Industry Outlook: Prices Gaining Momentum, Expected to Return to 24Q3 Levels

Since mid to late April 2025, production cuts have occurred in domestic regions such as Xinjiang and Inner Mongolia, as well as in overseas countries like Indonesia, with monthly import volumes decreasing by about 10 million tons year-on-year in June and July. Currently, checks on overproduction in production areas have been advanced, with an estimated annualized overproduction scale of about 230 million tons. At the same time, the pre-approval of increased production capacity is also expected to be fully promoted, with a theoretical impact on supply estimated at about 400 million tons. On the demand side, the "Golden September and Silver October" is approaching, and non-electric demand is expected to gradually be released, with coal chemical consumption maintaining a year-on-year growth rate of over 10% since the beginning of the year. Subsequently, the "anti-involution" will promote the elimination of backward production capacity in the refining industry, and coal chemicals are expected to enhance profitability due to their low-cost advantages.

Currently, coal prices are at the junction of the off-peak and peak seasons, with traders showing low purchasing sentiment. It is expected that coal prices may maintain slight fluctuations in the next one to two weeks, but with port inventories continuing to decline and supply continuing to contract under the policy of checking overproduction, the fundamentals will continue to improve, and coal prices will once again enter an upward channel, likely extending the upward trend into the off-season, returning to the level of 24Q3.

Fund Positioning: 25Q2 Most Listed Companies in the Sector Increased Their Holdings

From the perspective of fund holdings in listed companies in the coal sector, most listed companies saw a year-on-year decrease in fund holdings in the first half of the year, with the largest declines seen in Gansu Energy and Chemical, XINJI ENERGY, and Hengyuan Coal Power. Compared to 25Q1, most listed companies in the coal sector saw an increase in their holdings, with only Shanmei International, Huaihe Energy, and WTECL experiencing a decrease; the three companies with the largest increase in holdings were Huaibei Mining, XINJI ENERGY, and Haohua Energy Mid-Year Report Summary: Sector Profitability Declines Year-on-Year and Quarter-on-Quarter in Q2 2025

In Q2 2025, the coal sector's operating revenue decreased by 20.1% year-on-year and by 4.06% quarter-on-quarter; net profit attributable to shareholders decreased by 36.7% year-on-year and by 16% quarter-on-quarter; period expenses decreased year-on-year, increased quarter-on-quarter, and the expense ratio increased quarter-on-quarter; operating cash inflow decreased year-on-year, while cash outflow from investment and financing increased; the asset-liability ratio slightly increased year-on-year.

Investment Recommendations

We recommend the following investment themes: 1) High spot price elasticity targets, suggested to focus on Lu'an EED (601699.SH). 2) Stable performance and growth-oriented targets, suggested to focus on Jinkong Coal Industry (601001.SH) and Huayang Co., Ltd. (601915.SH). 3) Recovery in production growth, suggested to focus on Shanmei International (600546.SH). 4) Industry leaders with stable performance, suggested to focus on China Shenhua (601088.SH), China Coal Energy (601898.SH), and Shaanxi Coal and Chemical Industry (601225.SH). 5) Benefiting from nuclear power growth, strong alpha scarce natural uranium targets, suggested to focus on China General Nuclear Power Corporation Mining (01164).

Risk Warning

Risks of economic slowdown; risks of significant coal price decline; risks of policy changes