Guotai Haitong: Strategically bullish on thermal coal, domestic and international coal prices may trend upwards in resonance.

Guotai Haitong released a research report stating that from a global perspective, there is a strategic bullish view on thermal coal, with the most core upside surprise coming from the demand side. The significant increase in electricity demand driven by AI has reversed the weak electricity consumption trend in developed countries, while extreme weather is impacting existing global power grids, leading to a resonance of positive trends domestically and internationally. Looking ahead to the annual production, it is expected that due to the impact of "coal overproduction" in 25H2, national production is expected to slightly decrease on a month-on-month basis, with production estimated to be between 23.5-24 billion tons, and annual production between 47.5-48 billion tons, essentially unchanged compared to the previous year. In addition, with the decreasing certainty of imports, the overall supply is showing a downward trend. Guotai Haitong's main points are as follows: Coal prices have peaked and are falling, with the industry continuing to "fight against internal exhaustion." From a global perspective, there is a strategic bullish view on thermal coal, with the most core upside surprise coming from the demand side. The significant increase in electricity demand driven by AI has reversed the weak electricity consumption trend in developed countries, while extreme weather is impacting existing global power grids, leading to a resonance of positive trends domestically and internationally. 1) Demand side: In July, the total electricity consumption in the society increased by 8.6% year-on-year, while thermal power generation increased by 4.3% year-on-year, an increase of 3.2 percentage points compared to June, indicating a significant improvement in the supply-demand pattern. 2) Supply side: In July, the raw coal production was 380 million tons, a decrease of 40 million tons from the previous month. It is expected that the production in July will decrease significantly month-on-month, mainly due to extreme rainy weather in the Inner Mongolia and Shaanxi regions causing production and sales to be hindered. Looking ahead to the annual production, it is expected that due to the impact of "coal overproduction" in 25H2, national production is expected to slightly decrease on a month-on-month basis, with production estimated to be between 23.5-24 billion tons, and annual production between 47.5-48 billion tons, essentially unchanged compared to the previous year. In addition, with the decreasing certainty of imports, the overall supply is showing a downward trend. 2025Q2 is expected to be the turning point for the fundamentals, with the downward risks in the coal industry being fully released. With the downward risks under control and a clear outlook for the medium to long term, it is worth allocating more long-term funds. Thermal coal: Prices have peaked and are falling. As of September 12th, the closing price for Q5500 at Beihuang Port was 688 yuan/ton, a decrease of 3 yuan/ton (-0.4%) from the previous week. In terms of supply, the domestic market is stable, with imports continuing to decline. It is expected that the total supply of domestic and imported coal will remain stable with a downward trend throughout the year. On the demand side, it is expected that there will be a significant improvement in demand from June to August, with profits in Q3 expected to rebound. Coking coal: Futures and spot prices rebound, with molten iron production expected to not decline in the off-season. On September 12th, the main coking coal storage price at Jingtang Port (produced in Shanxi) was 1550 yuan/ton, unchanged from the previous week. The average daily molten iron production last week was 2.4 million tons, a slight decrease from the previous period. We believe that the off-season for the steel industry will not be weak, as the demand side continues to improve. Industry review 1) As of September 12, the main coking coal storage price at Jingtang Port was 1550 yuan/ton (-4.9%), the primary coking coal price at the port was 1704 yuan/ton (-0.4%), and the total coking coal inventory at three ports was 2.646 million tons (-1.6%). The operating rate of coking enterprises with a capacity of over 2 million tons was 79.18% (0.08%). 2) The offshore price of Q5500 at Newcastle Port in Australia fell by 2 US dollars/ton (-2.2%), and the cost of Beihuang Port coal (Q5500) is 23 yuan/ton lower than imported coal from Australia. The onshore price of coking coal in Australia was 202 US dollars/ton, an increase of 5 US dollars/ton from the previous week, and the cost of main coking coal produced in Shanxi at Jingtang Port is 100 yuan/ton lower than imported hard coking coal from Australia. Risk warning Macroeconomic growth falls short of expectations; large-scale entry of imported coal; supply exceeds expectations.