Sealand: Maintaining a "recommended" rating for the coal mining industry, suggesting to seize the value attributes of the low coal sector.

Sealand released a research report stating that the implementation of new U.S. tariff policies has had a certain impact on market sentiment, leading the market to seek stable assets. The investment value attributes of coal with high dividend yields and cash cow characteristics are worth paying attention to. From a broader perspective, the supply-side constraints of the coal mining industry have not changed, while demand-side fluctuations may occur temporarily, leading to price volatility and dynamic rebalancing. Looking back at 30 years of industry experience, coal prices have shown a trend of fluctuation and upward movement. In terms of the overall industry development trend, there is still a long-term demand for coal price increases, although the process may be turbulent, the direction should be clear. Leading coal enterprises have high asset quality, ample cash flow, and exhibit characteristics of "high profitability, high cash flow, high barriers to entry, high dividends, and high safety margins". It is recommended to grasp the value attributes of the coal sector at a low point and maintain a "recommended" rating for the coal mining industry. Sealand's main points are as follows: Supply-side: Coal production contracted year-on-year in December, but imports increased, resulting in a slight overall supply increase. Production: Coal production in December decreased by 1.0% compared to the previous year, with the decline expanding by 0.5 percentage points from November, related to the completion of annual production tasks and mine production cuts. In December 2025, the output of raw coal in the industrial sector was 440 million tons, a year-on-year decrease of 1.0%, with the decline increasing by 0.5 percent points compared to November, mainly due to more mines reducing production as the year-end approaches. In December 2025, the daily average output of raw coal in the industrial sector was 14.1 million tons, a monthly decrease of 129 thousand tons/day compared to the previous month, and a decrease of 59 thousand tons/day year-on-year. From January to December, the output of raw coal in the industrial sector was 4.83 billion tons, a year-on-year increase of 1.2%, with the cumulative growth rate decreasing by 0.2 percentage points compared to January to November. The sample large coal enterprises saw a tightening of coal production year-on-year in December. The report used China Shenhua Energy, Shaanxi Coal Industry, China Coal Energy, and Shanxi Lu'an Environmental Energy Dev.Co.,Ltd as samples. In December 2025, China Shenhua Energy produced 27.8 million tons of commercial coal, a year-on-year decrease of 5.4%; Shaanxi Coal Industry produced 14.74 million tons of coal, a year-on-year decrease of 1.0%; China Coal Energy produced 10.91 million tons of commercial coal, a year-on-year decrease of 8.0%; Shanxi Lu'an Environmental Energy Dev.Co.,Ltd produced 4.68 million tons of raw coal, a year-on-year decrease of 12.0%. Overall, the sample companies showed a tightening of coal production year-on-year. Import side: Coal imports increased by 11.90% year-on-year in December, with an increase of 31.8 percentage points compared to November, surpassing market expectations. In December 2025, China imported 58.6 million tons of coal, an increase of 11.90% year-on-year, with an increase of 31.8% compared to November, reaching a historical high. This was mainly due to a temporary tightening of domestic supply at the end of the year, with imported coal still having a price advantage and foreign suppliers rushing to export due to the expected imposition of export tariffs by Indonesia in 2026. From January to December 2025, coal imports totaled 490 million tons, a decrease of 9.60% year-on-year. Based on a calculation of the year-on-year growth rates of domestic production at -1.0% and imports at +11.90% in December 2025, the calculated year-on-year growth rate of domestic coal supply in December 2025 was +0.5% (excluding changes in calorific value), an increase of 2.8 percentage points from November. Demand side: Electricity production decreased year-on-year in December, while the chemical industry and coking coal continued to contribute positive growth; overall demand decline was affected by a narrower decline in electricity production compared to the previous month. Electricity: Electricity production in the industrial sector decreased by 3.2% year-on-year in December, with a 1.0 percentage point reduction in the decline compared to November. Electricity production in the industrial sector continued to grow. In December, industrial electricity generation reached 858.6 billion kilowatt-hours, an increase of 0.1% year-on-year; with a daily average electricity generation of 27.7 billion kilowatt-hours. From January to December, industrial electricity production reached 971.59 billion kilowatt-hours, an increase of 2.2% year-on-year. In December, the decline in industrial electricity production narrowed, while the growth rates of hydropower, nuclear power, wind power, and CECEP Solar Energy production slowed down. Specifically, industrial thermal power generation declined by 3.2% year-on-year in December, with a decrease of 1.0 percentage points compared to November; hydropower generation increased by 4.1%, a decrease in growth rate by 13.0 percentage points compared to November; nuclear power generation increased by 3.1%, a decrease in growth rate by 1.6 percentage points compared to November; wind power generation increased by 8.9%, a decrease in growth rate by 13.1 percentage points compared to November; CECEP Solar Energy generation increased by 18.2%, a decrease in growth rate by 5.2 percentage points compared to November. From January to December, industrial thermal power generation decreased by 1.0%, with a widening decline of 0.3 percentage points compared to January to November; hydropower generation increased by 2.8%, with a widening growth rate of 0.1 percentage points compared to January to November; CECEP Solar Energy generation increased by 24.4%, with a slower growth rate of 0.4 percentage points compared to January to November; wind power generation increased by 9.7%, with a wider growth rate of 1.0 percentage points compared to January to November; nuclear power generation increased by 7.7%, with a slower growth rate of 0.4 percentage points compared to January to November. Steel: Iron and coke production in December showed differentiation, with year-on-year changes of -9.9% and +1.9% respectively, and a decrease in growth rates of -1.2 percentage points and -0.4 percentage points respectively. In December 2025, China produced 60.72 million tons of pig iron, a year-on-year decrease of 9.9%, with the decline increasing by 1.2 percentage points compared to the previous month; 42.74 million tons of coke were produced, a year-on-year increase of 1.9%, with the growth rate slowing down by 0.4 percentage points compared to the previous month. From January to December 2025, China produced a total of 836.04 million tons of pig iron, a year-on-year decrease of 3.0%; and 504.12 million tons of coke, a year-on-year increase of 2.9%. Looking downstream, from January to December, there was a significant increase in steel exports compared to January to November, with slowdowns in infrastructure and manufacturing investments, while the real estate sector remained sluggish. From January to December 2025, the completed investment in infrastructure decreased by 1.48% year-on-year, with a slowdown of 1.61 percent compared to January to November; real estate development investment decreased by 17.2% year-on-year, with an increase in the decrease rate by 1.3 percent compared to January to November; new construction area of houses decreased by 20.4% year-on-year, with a slight decrease of 0.1 percent compared to January to November. In addition, from January to December 2025, manufacturing investment increased by 0.6% year-on-year, with a decrease in growth rate by 1.3% compared to January to November; steel exports increased by 7.5% year-on-year, with an increase of 0.8% compared to January to November. Building materials and chemical industry: Cement and chemical industries showed differentiation, with year-on-year changes of -6.6% and +8.4% respectively in December, with growth rates of +1.6% and +0.19% respectively compared to November. In December 2025, the national cement production was 144 million tons, a year-on-year decrease of 6.6%, with the decline rate slowing down by 1.6 percentage points compared to November; the combined coal consumption in the chemical industry (methanol, synthetic ammonia, PVC, soda ash, ethylene glycol) was 29.3216 million tons, a year-on-year increase of 8.41%, with an increase in growth rate of 0.19 percentage points compared to November; from January to December, the national cement production was 1.693 billion tons, a year-on-year decrease of 6.90%, with the decline rate remaining the same compared to January to November; the combined coal consumption in the chemical industry (methanol, synthetic ammonia, PVC, soda ash, ethylene glycol) was 362.1949 million tons, a year-on-year increase of 11.54%, with a slower growth rate of 0.28 percent compared to January to November. According to calculations from the Coal Industry Association, if the percentages of electricity, steel, chemical industry, and building materials in the downstream demand for coal in 2024 were 62%, 15%, 8%, and 8% respectively, the estimated year-on-year change in coal consumption driven by the four major industries in December 2025 was -1.5%, with a narrower decline of 0.7 percentage points compared to November. Inventory: Power coal port inventories increased, and coking coal upstream mine inventories increased. Power coal inventory: Port inventories increased. At the end of December 2025, inventories of production enterprises of power coal decreased by 103 thousand tons to 3.969 million tons compared to the beginning of the month, indicating a slight improvement in the sales of high cost-effective coal mines; Northern port power coal inventories increased by 1.308 million tons to 28.406 million tons, a year-on-year increase of 2.86 million tons, with limited activity in trader transfers and lower coal consumption by power plants leading to decreased port outflows, resulting in higher inflows than outflows; inventories of the six major power plants decreased by 1.155 million tons to 13.375 million tons. Coking coal inventory: Upstream inventories increased. At the end of December 2025, compared to the beginning of the month, inventories of production enterprises of coking coal increased by 202.2 thousand tons to 2.1174 million tons, still at a lower level compared to the same period; North port coking coal inventories increased by 60 thousand tons to 2.9505 million tons; inventories of coking coal in coking factories increased by 61.1 thousand tons to 2.9505 million tons; inventories of coking coal in steel mills increased by 32.1 thousand tons to 5.2868 million tons. Prices: In December, the average monthly price of power coal at northern ports was 731 yuan/ton, a month-on-month decrease of -11.00% (a decrease of 90 yuan/ton) and a year-on-year decrease of -6.80% (a decrease of 53 yuan/ton); the average monthly price of main coking coal at ports was 1,681 yuan/ton, a month-on-month decrease of -6.67% (a decrease of 120 yuan/ton) and a year-on-year increase of 5.65% (an increase of 90 yuan/ton). In summary, In December, supply-side imports grew faster than expected, demand-side electricity demand remained weak with warmer temperatures, overall supply and demand was relatively loose, inventories in northern ports increased, and port coal prices fell by 90 yuan/ton month-on-month. On the supply side, production and imports diverged year-on-year in December, with overall supply increasing compared to November. Coal production in December was 4.4 billion tons, a year-on-year decrease of 1.0%, with the decline expanding by 0.5 percentage points compared to November; coal imports increased year-on-year by 11.9%, with an increase of 31.8% compared to November, indicating an overall increase in supply. On the demand side, overall demand declined in December, mainly due to a decrease in electricity production dragging down demand, while the chemical and metallurgical sectors continued to make positive contributions. In December, industrial thermal power generation decreased by 3.2% year-on-year, with a narrowing of the decline by 1.0 percentage points compared to November; coal consumption in the chemical industry increased by 8.41% year-on-year, with an increase of 0.19 percentage points compared to November; and coking coal production increased by 1.90%, with a slower growth rate compared to November. In terms of inventory, inventories in northern ports reached new highs in December, with port power coal inventories increasing by 1.308 million tons to 28.406 million tons, an increase of 286 million tons year-on-year. Overall, in December, the supply-demand balance was relatively loose, port inventories were higher year-on-year, and coal prices fell month-on-month, with the average price of 5500 kcal thermal coal at Qinhuangdao port in December at 731 yuan/ton, a decrease of 90 yuan/ton from November. Looking ahead, with expectations of tightening supply before the Spring Festival and the upcoming cold weather, coupled with expectations of pre-holiday stockpiling, there is hope for an improvement in supply and demand, and support for the price of thermal coal. In the medium term, whether the policies to ensure supply capacity will change or not may have a significant impact on the balance of industry supply and demand. Risk warning: 1) Economic growth is less than expected; 2) Policy control measures exceeding expectations; 3) Risks of continued substitution by renewable energy; 4) Impact of coal imports; 5) Focus on company performance may not meet expectations; 6) Risk of measurement errors; 7) Risk of fluctuation in the price of thermal coal; 8) Risk of global trade frictions.