Guotai Junan Securities: The price of thermal coal has stopped falling, and a rebound in the peak season is imminent

According to the Zhitong Finance APP, Guosen Securities released a research report stating that as the peak season approaches, the price of thermal coal stopped falling at the end of May, and a rebound in the peak season is imminent. The level of inventory reduction and daily consumption will determine the extent of the rebound; coking coal prices, on the other hand, are probing the bottom. In terms of thermal coal, prices continued to decline during the consumption off-season in May, but as the peak season approached at the end of the month, market sentiment warmed, and coal prices stopped falling. Looking ahead to June, daily consumption is entering an upward channel, and coal prices are expected to rebound; however, attention still needs to be paid to daily consumption, water inflow, inventory reduction, and coal import conditions. Currently, daily consumption is entering an upward channel, supporting the rebound in coal prices, and the sector is at a relatively low position after previous adjustments, suggesting attention to left-side layout opportunities.

Guosen Securities' main viewpoints are as follows:

Supply Side

In April 2025, domestic supply significantly decreased, with national raw coal production increasing by about 18 million tons year-on-year but decreasing by about 51 million tons month-on-month; as of May 25, the cumulative production of sample coal mines in May slightly increased year-on-year but slightly decreased month-on-month. In terms of domestic production, from January to April 2024, the cumulative national raw coal production reached 1.58 billion tons, an increase of 6.6% year-on-year; in April, the national raw coal production was 390 million tons, an increase of 3.8% year-on-year, but a decrease of 11.6% month-on-month; by production area, the output in major producing areas decreased month-on-month, but only Inner Mongolia saw a year-on-year decrease.

In April, coal imports decreased by 2.3% month-on-month and 16.4% year-on-year, remaining at a relatively low level; prices maintained an inverted structure, and import volumes are expected to remain relatively low. In terms of imports, from January to April, domestic imports of coal and lignite totaled 150 million tons, a decrease of 5.3% year-on-year; in April, imports of coal and lignite were 37.83 million tons, a decrease of 16.4% year-on-year. By region, coal imports from Indonesia significantly decreased month-on-month, while Australian coal increased significantly. Additionally, in the first half of May, the reference price for Indonesian thermal coal (HBA) was fully adjusted upward, and in the second half of May, the HBA for Indonesia's low-calorie coal, which is mainly imported by China, was still slightly adjusted upward, with import volumes expected to remain relatively low.

Demand Side

April gradually entered the demand off-season. Overall, except for chemical coal, which maintained strong demand, pig iron production was relatively high, and demand from the steel smelting end was acceptable, but demand for electricity coal and cement was poor. Overall, the demand for commodity coal in April declined month-on-month, and the growth rate narrowed. From January to April, the national commodity coal consumption was 1.66 billion tons, an increase of 0.3% year-on-year; in April, the national commodity coal consumption was 390 million tons, an increase of 0.7% year-on-year. By downstream sector, in April, the total electricity consumption in society increased by 4.7% year-on-year, with the growth rate slightly declining by 0.1 percentage points compared to March. The total power generation in society in April increased by 0.9% year-on-year, with the growth rate declining by 0.9 percentage points month-on-month, among which new energy saw high growth, hydropower turned negative year-on-year, and thermal power maintained a year-on-year decrease of 2.3%.

The demand for chemical coal remains high. As of May 30, the production of PVC from coal, ethylene glycol from coal, and methanol from coal in 2025 increased by 2.3%, 14.1%, and 12.6% year-on-year, respectively. From January to April, the cumulative production of synthetic ammonia increased by 7.2% year-on-year, with April's production increasing by 6.8% year-on-year. Coking coal prices have declined, and downstream coking plants and steel mills are still profitable, maintaining high production enthusiasm. In April, crude steel production remained flat year-on-year, while steel exports increased by 13.4% year-on-year. Downstream demand is weak, with cement production turning negative year-on-year in April Inventory Aspect

Port and key coal mine inventories are at high levels, while power plant inventories have slightly decreased from high levels. Mainstream port inventories remain high, with a reduction in northern port inventories mainly due to limited inflows; coal mine inventories are approximately 11 million tons higher than the same period last year; the inventories of the six major power generation groups have slightly decreased year-on-year. As temperatures rise, there are risks of spontaneous combustion and declining calorific value in stockpiled coal, and the current pressure to clear ports remains significant. The future inventory reduction at ports will continue to be one of the main factors affecting coal prices. With the arrival of the peak demand season downstream, the inventory of coking coal at ports has decreased; downstream (coking plants/steel mills) profits are acceptable, and production enthusiasm is high, leading to an increase in inventory, but overall, it maintains a just-in-time purchasing strategy. However, the downstream is gradually entering the production off-season, with a decline in pig iron output and reduced rigid demand, leading to an expected decrease in inventory.

Price Aspect

As the peak season approaches, the price of thermal coal stopped falling at the end of May, and a rebound in the peak season is imminent, with the level of inventory reduction and daily consumption determining the extent of the rebound; coking coal prices are probing for a bottom. In terms of thermal coal, prices continued to decline during the consumption off-season in May, but at the end of the month, as the peak season approached, market sentiment warmed, and coal prices stopped falling. Looking ahead to June, daily consumption is entering an upward channel, and coal prices are expected to rebound; however, attention still needs to be paid to daily consumption, water inflow, inventory reduction, and coal import conditions. Regarding coking coal, the market supply is relatively ample, and coking coal prices are still probing for a bottom. As the downstream enters the demand off-season, coupled with the impact of low-priced Mongolian coal imports, price pressure is increasing.

Investment Suggestions

Currently, daily consumption is entering an upward channel, supporting a rebound in coal prices, and the sector is at a relatively low position after previous adjustments, suggesting attention to left-side layout opportunities. Attention should also be paid to port inventory reduction levels, water inflow, and other conditions. Key focuses should be on (1) leading coal companies with stable performance: China Shenhua Energy (601088.SH), China Coal Energy (601898.SH), Shaanxi Coal and Chemical Industry (601225.SH), etc.; (2) steadily growing targets: China Power Investment Corporation (002128.SZ), Jinko Coal Industry (601001.SH), Huabei Mining (600985.SH), etc.; (3) leading coal machinery company TDTEC (600582.SH), etc.

Risk Warning

Overseas economic slowdown; large capacity release; substitution by new energy; impact of safety accidents