Shanxi: Authoritative association advocates for all-round help to balance coal supply and demand.

Shanxi released a research report stating that after previous adjustments, coal prices have stabilized on the supply side. However, with the National Two Sessions approaching, it is anticipated that macroeconomic policies will continue to be favorable, with a focus on the improvement of downstream demand expectations. Metallurgical coal inventories are at historically low levels, and the prices of semi-coke still have some room for elasticity in the later period. With adjustments in Indonesia's pricing policy, there may be uncertainties in coal imports, but it is not expected that there will be much further room for price declines. In terms of funds, as the annual report season approaches, the trend of long-term funds entering the market from insurance companies, etc., has increased, making the coal sector more attractive in terms of valuation and dividend yield after the correction. Investment recommendations: paying attention to repurchasing and increasing holdings, as well as the continuous implementation of cases in the currency market such as SFISF, speculative interest rate transactions are expected to further deepen the value of the coal dividend, and it is recommended to focus on high-dividend stocks with high elasticity and stable high dividends. Key points from Shanxi: Event On March 3, 2025, the China Coal Industry Association and the China Coal Distribution Association issued a call to action: to ensure the safe and stable supply of coal, and to maintain the stable operation of the coal market, they called on all coal enterprises in the industry to: first, strictly enforce long-term contracts for power coal to ensure contract fulfillment; second, promote the control of coal production in an orderly manner to maintain production and supply-demand balance; third, promote the washing of all raw coal to improve clean coal production levels; fourth, make good use of imported coal to supplement and regulate effectively control the volume of low-quality coal imports; fifth, strengthen industry self-discipline and actively fulfill social responsibilities. Emphasizing long-term contract fulfillment for power coal to safeguard the basic consumption of coal Long-term coal contracts are sales contracts with longer terms, clear quantities, and fulfillment progress, and clear price and transportation mechanisms, which are guided and supervised by the government. According to the "Notice on the Signing and Fulfillment of Long-term Contracts for Power Coal in 2025," power generation enterprises are still required to have long-term contract signing amounts not less than 80% of their coal demand in 2025, and coal enterprises are required to have contract signing amounts of 75% of their own resources. The supply and demand for long-term contracts still act as the "cornerstone" of the coal market. As of the end of February, the reference price for 5500 kcal power coal in the Bohai Sea region was 701 yuan/ton, while the annual long-term contract price for power coal at Qinhuangdao Port in February was 691 yuan/ton, significantly reducing the price difference between the two. Strict long-term contract fulfillment requirements help avoid large fluctuations in the coal market, which in the long run benefits both coal and power sides. Call for reasonable control of coal supply growth from the perspectives of safety, environmental protection, and import First, the call to action suggests that coal companies voluntarily adjust production pace from the perspective of safety production. Following the requirements for ensuring supply but with a long cycle for new capacity investment in the coal industry in 2023, the release of production capacity through means such as incremental production has indeed led to an increase in the incidence of coal mine accidents. With the increasing depth of coal mining in central regions and Shanxi, safety production still needs to be taken seriously. Second, from an environmental perspective, push for all raw coal to be washed; in 2023, large coal enterprises had a raw coal washing rate of only 69%, pushing for an increase in washing rates, which will reduce pollution during coal transportation and objectively reduce pressure on port capacity, easing supply-demand contradictions. Third, from the perspective of coal imports, advocate for strict control over the import and use of low-grade, poor-quality coal to maintain order in coal imports; in 2024, China's raw coal production increased by 1.3% year-on-year, but coal and lignite imports increased by 14.4% year-on-year, with the low-grade lignite import growth rate reaching 16.69%, which has had a significant impact on the balance of domestic coal supply and demand. Risk factors The call to action does not have the force of administrative regulations, and the subsequent impact still needs to be observed; the risk of coal supply release exceeding expectations continues; the risk of demand improvement falling short of expectations; the risk of import coal volume exceeding expectations; the risk of coal prices falling disorderly; and the risk of coal enterprises facing transformation.