Open Source Securities: Coal prices are experiencing an inertia-driven upward trend, and the coal supply and demand fundamentals are expected to continue improving

According to the Zhitong Finance APP, Kaiyuan Securities released a research report stating that as of October 24, the closing price of Qin Port Q5500 thermal coal was 770 yuan/ton, an increase of 22 yuan/ton from the previous period, with a growth rate of 2.94%. Other port price indicators have also reached 770 yuan. In the past two weeks, the price of thermal coal has accelerated its increase, mainly due to the dual impact of supply contraction and a surge in demand, where the supply contraction is a continuation of strict checks on overproduction after the National Day holiday, and the surge in demand is driven by the cold wave in the north leading to increased heating needs and ports accelerating inventory replenishment. Currently, the prices of thermal coal and coking coal are still at historically low levels, providing space for a rebound.

The main viewpoints of Kaiyuan Securities are as follows:

Thermal coal has successfully reached the 750 yuan threshold and is undergoing an upward process.

The price of thermal coal has surged, as of October 24, the closing price of Qin Port Q5500 thermal coal was 770 yuan/ton, an increase of 22 yuan/ton from the previous period, with a growth rate of 2.94%. Other port price indicators have also reached 770 yuan, achieving the price target of 750 yuan for coal and electricity profit sharing. It is currently undergoing an upward process and is expected to reach the anticipated fourth target price range of 800-860 yuan. In the past two weeks, the price of thermal coal has accelerated its increase, mainly due to the dual impact of supply contraction and a surge in demand, where the supply contraction is a continuation of strict checks on overproduction after the National Day holiday, and the surge in demand is driven by the cold wave in the north leading to increased heating needs and ports accelerating inventory replenishment.

Regarding coking coal, as of October 24, the price of premium coking coal at Jing Tang Port was 1760 yuan/ton, rebounding from a low of 1230 yuan in early July; coking coal futures have rebounded even more significantly, rising from 719 yuan in early June to the current 1248 yuan, with a cumulative increase of 73.5%; the price of coking coal fluctuates with the price of thermal coal, showing a very obvious pattern at a ratio of 2.4 times. From a fundamental perspective, the production and import of Mongolian coking coal have decreased, which has also catalyzed the rise in domestic coking coal prices.

Investment logic: The prices of thermal coal and coking coal have reached the right side of the inflection point.

Thermal coal is a policy-driven coal type, and the price increase will go through four processes: “restoring central enterprise long-term contracts, restoring local long-term contracts, reaching the coal and electricity profit-sharing line, and surpassing and approaching the breakeven line of power plant financial statements.” The spot price has recovered above the long-term contract prices (central enterprise long-term contract at 670 yuan and local long-term contract at 700 yuan), which is essentially an inevitable result under the dual-track operation mechanism of bulk commodities. The long-term contracts, being preferential varieties, create an inverted relationship with the spot prices, prompting downstream users to prioritize purchasing spot goods and delaying the purchase of long-term contracts, thereby driving the recovery of spot prices.

Reaching the profit-sharing position for “coal and thermal power enterprises” (estimated to be around 750 yuan in 2025) is the ideal result of the policy to restore coal prices. The upward process after the ideal target is an inertial result, as the policy shift is not as precise as a scalpel, and this process is inevitable. As for whether there is a peak extreme for coal prices to surpass, the prediction is that the breakeven line of power plant financial statements is 860 yuan, with a range of 800-860 yuan.

Coking coal is a market-driven coal type, and its price is more determined by the supply and demand fundamentals. The target price can be referenced through the “ratio of coking coal to thermal coal prices.” The spot price ratio of premium coking coal at Jing Tang Port to thermal coal at Qin Port is 2.4 times, thus the target prices for coking coal corresponding to the first, second, third, and fourth targets of thermal coal are 1608 yuan, 1680 yuan, 1800 yuan, 2064 yuan. Coking coal futures will repair the discount to the spot price of premium coking coal at Jing Tang Port.

Investment Advice: Dual Logic of Cycle and Dividend, Four Main Lines of Layout

Dual Logic of Coal Stocks One: Cyclical Elasticity. Current prices of thermal coal and coking coal are still at historical lows, providing space for a rebound. With the supply-side "overproduction check" policy promoting production cuts and the demand side entering the peak heating season, the coal supply-demand fundamentals are expected to continue improving, and both types of coal prices have upward elasticity. Among them, thermal coal has the support of long-term contract mechanisms and the logic of "shared profits between coal and thermal power enterprises"; while coking coal, due to its higher marketization, is more sensitive to supply-demand changes and may exhibit greater price elasticity.

Dual Logic of Coal Stocks Two: Steady Dividends. Most coal companies still maintain a high willingness to distribute dividends, with six listed coal companies announcing interim dividend plans in the mid-term report (China Shenhua / Shanxi Coking Coal / Shaanxi Coal and Chemical Industry / Shanghai Energy / Yanzhou Coal Mining / China Coal Energy). In the context of high global political and economic uncertainty and expectations for stabilizing the domestic economy, investment behavior shows emotional impulses, and the coal sector possesses both cyclical and dividend attributes. Currently, coal holdings are at low levels, and the fundamentals have reached the right side of the turning point, making it the right time to layout.

Four Main Lines of Selected Coal Stocks to Benefit: Main Line One, Cyclical Logic: Jinko Coal Industry (601001.SH), Yanzhou Coal Mining (600188.SH) for thermal coal; Pingmei Coal (601666.SH), Huaibei Mining (600985.SH), Lu'an Environmental Energy (601699.SH) for metallurgical coal; Main Line Two, Dividend Logic: China Shenhua (601088.SH), China Coal Energy (601898.SH) (dividend potential), Shaanxi Coal and Chemical Industry; Main Line Three, Diversified Aluminum Elasticity: Shenhuo Co., Ltd. (000933.SZ), Electric Power Investment Energy (002128.SZ); Main Line Four, Growth Logic: XINJI ENERGY (601015.SH), Guanghui Energy (600603.SH).

Risk Warning

Risks of economic growth slowdown, risks of increased coal imports, risks of accelerated replacement by renewable energy