Zheshang: The coal price central point will increase in 2026. It is recommended to layout around two main themes.

Zheshang released a research report stating that looking back on 2025, the supply of coal was initially high and then low, with a decrease in imported coal, yet demand remained resilient. Supported by excess production capacity, coal prices experienced a V-shaped reversal. Looking ahead to 2026, the domestic economy is expected to remain stable, with expected demand growth, and a balance between limited production and supply guarantees resulting in an increase in the central price of coal. Supply and demand determine inventory, and inventory determines prices. The bank believes that the inventory for 2026 will be between 2024-2025 levels, with an average price of 800-850 yuan/ton for thermal coal; considering the relatively weak demand for coking coal downstream and potential supply-side increments, the price ratio of coking coal to thermal coal is estimated to be around 2 times, corresponding to an average coking coal price of 1500-1700 yuan/ton. If inventory reduction exceeds expectations, coal prices are expected to increase further. The industry is rated as "optimistic" by the bank. The bank suggests focusing on two main areas: firstly, focusing on companies with high dividends and incremental demand for thermal coal; secondly, focusing on distressed turnaround opportunities (breaking net worth, losses). Zheshang's main points are as follows: Review of 2025: Supply: Production initially high and then low, with growth gradually turning negative Production was initially high and then low. From January to October 2025, the total national raw coal output reached 3.973 billion tons, an increase of 1.5% year-on-year. The production for the whole year was high in the first half and then low in the second half, with production growth turning negative from July to October. Decrease in imports. From January to October 2025, the total imported coal and brown coal in China reached 388 million tons, a decrease of 11% year-on-year. Imports of coal increased at the beginning of the year, but from March onwards, monthly growth rates turned negative, leading to negative growth from March to October. Stable external coal transportation from Xinjiang. As of November 28, 2025, the Urumqi Iron Bureau had completed 85.1801 million tons of external coal transportation from Xinjiang, an increase of 6.4% year-on-year. Demand: Consumption was initially suppressed and then rebounded, showing overall resilience Consumption was initially suppressed and then rebounded. From January to October 2025, the total consumption of commercial coal in China was approximately 42.4 billion tons, an increase of 0.1% year-on-year. This was mainly due to the high growth rate of coal used in the chemical industry and the strong resilience of coal used in the steel industry. Differentiated coal consumption by industry. By industry, coal consumption in the chemical industry was 360 million tons (year-on-year 10.9%), in the steel industry it was 590 million tons (year-on-year 0.2%), in the construction materials industry it was 400 million tons (year-on-year -4.9%), and in the power industry it was 2.35 billion tons (year-on-year -1.1%). Prices: Coal prices showed a V-shaped reversal, with long-term agreements remaining stable overall Coal prices showed a V-shaped reversal. At the beginning of the year, the prices of thermal coal, coking coal, and anthracite coal were 767, 1520, and 980 yuan/ton respectively. The lowest prices during the year were 609, 1230, and 820 yuan/ton respectively. As of November 28, the prices had rebounded to 816, 1670, and 930 yuan/ton respectively. Long-term agreement prices in Beijing and Tangshan: The long-term agreement price for 5500 kcal thermal coal in Qinhuangdao was reduced from 693 yuan/ton at the beginning of the year to a low of 666 yuan/ton in July, then increased to 684 yuan/ton in November. Outlook for 2026: Policy: Balancing limited production and supply guarantees to maintain a dynamic equilibrium of supply and demand Policies introduced mid-year aimed at curbing excess production and promoting stable and orderly supply. Winter energy supply security requires stable energy production and supply. Policies aim to strike a balance between curbing excess production and ensuring supply. Capacity substitution policies may restrict the scale of production capacity. The "15th Five-Year Plan" proposes to speed up the construction of a new energy system, with coal playing a role in ensuring energy security. Peak electricity consumption in thermal power plants will increase coal consumption. Market: Supply and demand determine inventory, and inventory determines prices Inventory levels are often used to judge the trend of natural gas prices in the United States. China's coal industry and U.S. natural gas industry share similarities. By referencing the relationship between coal inventory and its 5-year average, coal price trends can be predicted. Forecast: Expected demand growth, resulting in an increase in central prices It is expected that coal consumption in 2026 will reach 4.95 billion tons, an increase of 1% year-on-year. By industry, it is expected that the main growth in coal consumption will come from the demand for electricity and coal in the chemical industry, with the demand for coal in the chemical industry expected to continue growing, while the demand for coal in the steel and construction materials industries is expected to decrease slightly. It is projected that production in 2026 will increase slightly to 4.87 billion tons, an increase of 0.6% year-on-year. Assuming that demand growth exceeds supply growth, the central price of coal is likely to increase. Risk warning: Slowdown in overseas economies; significant release of production capacity; substitution of new energy sources; impact of safety accidents; changes in supply policies.