Guotai Haitong: Coal industry opens a new upswing cycle, recommend leading companies with growth potential in the next 5 years.

Guotai Haitong released a research report stating that the bottom of the current coal sector cycle has been confirmed in 25Q2, the supply and demand situation has shown a reversal turning point, and a new cycle of uptrend is expected in 2026. They reaffirmed their strategic bullish view on the energy industry for the next 5-10 years and recommended investing in YANCOAL AUS (03668) in the global market; for A shares, they recommended leading companies with growth potential over the next 5 years. Key points from Guotai Haitong: Review of the 2025 coal market, "ice and fire" in the first and second halves The bank believes that the core issue in the first half of 2025 was the demand shortfall due to weather factors, coupled with the high stocks caused by the massive imports in 24Q4 and the release of production in major domestic producing areas, which led to a sharp decline in the fundamentals of the coal market in 25H1. Prices continuously fell below key levels of 800, 770, 700, and 650 yuan per ton, with market expectations predicting coal prices to gradually fall to the "freezing point" of industry-wide losses in 2015. Since June, with the peak demand in the summer season for electricity, the total electricity consumption in 2025 has grown by 5%, disproving the market's pessimistic expectations for demand. At the same time, since July, the "excessive production inspections" and the contraction in domestic production driven by anti-internal vortex have gradually tightened the balance of supply and demand, reversing the supply and demand situation compared to H1. Coal prices have entered a fast rising channel. Outlook for 2026, the start of a new cycle of uptrend The bank holds a relatively optimistic view on the new cycle of uptrend in coal in 2026, with focus on demand, with supply being an added benefit. From the demand side, emerging sectors such as AI, new energy, and urban and rural electricity consumption have gradually become significant contributors to new electricity consumption, with electricity demand becoming less sensitive to economic fluctuations, likely maintaining a good growth trend of over 5%. Furthermore, the document No. 136 of 2025 has led to a significant decrease in new photovoltaic installations since June 2025, combined with the shift of core policies in the wind and nuclear power industries towards targeted support after the National Day, economic decline may start to put pressure on new installations, entering a phase of "slower growth but higher quality." With stable growth in total electricity consumption, the decline in new energy installations may peak, reducing pressure on coal from the substitution of thermal power. On the supply side, since July, the National Energy Administration has focused on the issue of "overproduction" in coal, likely continuing to restrain the rise in coal prices and limit the increase in national production. Additionally, high overseas demand for energy and Indonesia's production limits may result in no incremental growth or even a decrease in imports, keeping overall supply in 2026 similar to that of 2025. The overall supply and demand situation continues to improve, and it is predicted that coal prices will fully recover to above 800 yuan per ton in the second half of 2026. Global energy perspective With demand surging and structural supply mismatch, the turning point of the long coal cycle may be shifting upwards. Strategically bullish on global energy, the rapid expansion of deep electrification in the industrial field, data centers driven by artificial intelligence, and the demand driven by extreme climate events under global warming are all leading to an unexpected growth in global electricity demand. However, especially in developed countries like Europe and the United States, the reliance on renewable energy as the main source and the outdated electrical grid systems are unable to provide stable power supply for AI. Combined with extreme climate events pushing peak demand, coal will need to continue to play a role as the "ballast" of energy supply. From a global perspective, coal in European and American countries may have already passed the peak of pressure, with the United States seeing a significant increase in coal consumption for the first time in the past 10 years. Risk warnings: Economic growth falling short of expectations, imports exceeding expectations, and unexpected supply releases.