Guotai Haitong: The current rapid decline in coal prices is limited, and it is expected that a demand uptrend cycle will begin in 2026.

Guotai Haitong released a research report stating that the core driving logic of the trend of coal prices is the supply and demand situation. The bank believes that there is limited room for the rapid decline of coal prices at present, and expects the bottom of this round to be around 680-700 yuan/ton. In addition, after the implementation of Document No. 136 in June, there has been a cliff-like decline in the installation of photovoltaic equipment, indicating that the pressure of new energy substitution will decrease in the first quarter of 2026. The bank believes that the bottom of the coal sector's cycle has been confirmed in Q2 2025, the supply and demand situation has already shown a turning point, and the bank expects that starting from the second half of 2026, coal and downstream major demand for thermal power will enter a new upward cycle, which is worth looking forward to. Guotai Haitong's main points are as follows: Coal prices have a bottom, and demand is key. The core driving logic of the trend of coal prices is the supply and demand situation. The bank believes that there is limited room for the rapid decline of coal prices at present, and expects the bottom of this round to be around 680-700 yuan/ton. From the perspective of current supply and demand in the peak season, demand is in the middle range of the past five years, and port inventories have been trending downward recently. However, we still need to pay attention to the weather in the future, but there is not much downside potential (historically, it has also been a mild winter); in November, coal prices rebounded to above 800 yuan/ton, with import volume increasing by only 5.9% to 44 million tons month-on-month, while domestic supply in November recovered to 430 million tons, but still decreased year-on-year. The rush to install 200GW of photovoltaic equipment from January to May 2025 is the last pressure shock for this winter, and the cliff-like decline in the installation of photovoltaic equipment after the implementation of Document No. 136 in June indicates that the pressure of new energy substitution will decrease in the first quarter of 2026. The bank believes that the bottom of the coal sector's cycle has been confirmed in Q2 2025, the supply and demand situation has already shown a turning point, and the bank expects that starting from the second half of 2026, coal and downstream major demand for thermal power will enter a new upward cycle, which is worth looking forward to. Thermal coal: Prices rebound in the off-peak season. As of December 19, 2025, the closing price of Q5500 coal at Huanghua Port in northern China was 721 yuan/ton, a decrease of 42 yuan/ton (-5.5%) from the previous week. Supply-wise, the domestic market is stable, with imports continuing to decline: it is expected that the total domestic and import supply for the year will remain basically stable and continue to decline; on the demand side, demand has significantly improved in the off-peak season, and Q3 profits are expected to rebound. Coking coal: Futures and spot prices rebound together, molten iron production is expected to be resilient in the off-peak season. As of December 19, 2025, the price of main coking coal at Jingtang Port (produced in Shanxi) was 1700 yuan/ton, an increase of 50 yuan/ton (3.0%) from the previous week. The average daily molten iron production decreased slightly week-on-week last week, and the bank believes that the demand side is expected to be resilient in the off-peak season. Industry review: 1) As of December 19, 2025, the price of main coking coal at Jingtang Port was 1700 yuan/ton (3.0%), the price of primary coke at ports was 1696 yuan/ton (-0.5%), and the total inventory of coking coal at three ports was 2.797 million tons (-7.1%), with a starting rate of 79.18% for coking enterprises with a capacity of over 2 million tons. 2) The offshore price of Q5500 coal at Newcastle Port in Australia fell by 3 USD/ton (-3.8%), with northern ports (Q5500) coal cost 19 yuan/ton lower than Australian imported coal; the onshore price of coking coal in Australia was 228 USD/ton, up by 4 USD/ton (1.7%) from the previous week, and the main coking coal produced in Shanxi at Jingtang Port was 141 yuan/ton lower in cost than imported hard coking coal from Australia. Risk warnings: Economic growth falls short of expectations; large-scale imports of coal occur; supply exceeds expectations.