Since late February, geopolitical conflicts have driven significant increases in oil and gas prices, with the resulting sentiment spillover affecting the coal sector as part of the broader energy complex. The primary pathways for coal to substitute for oil and gas are through chemical production replacement and energy replacement, primarily impacting thermal coal. However, because coking coal possesses both energy and industrial commodity attributes, the effects have transmitted to the coking coal market. Capital and sentiment shifts have occurred notably faster than changes in fundamental supply and demand. In the domestic market, the chemical replacement effect is stronger than the energy replacement effect. The transmission of high oil and gas prices to coking coal involves a long chain and relatively complex logic. It is important to note that China's coal supply is predominantly domestically sourced, with imports serving as a supplement. China's coal import dependency is approximately 10%, while coking coal import dependency is around 20%, with major suppliers including Mongolia and Russia, where supply remains relatively stable. Currently, there is still room for growth in domestic coal production, and imports from Mongolia remain high, contributing to stable coking coal supply. In short, energy substitution is a slow-moving variable, and the transmission path from rising oil and gas prices to coking coal is lengthy and logically complex. The recent sharp price increases in futures markets have already partially priced in the benefits of coal substituting for oil and gas. The core future drivers will be the progression of geopolitical conflicts and changes in oil and gas prices, with attention needed on actual incremental demand for coal.

The main analytical points are as follows:

**1. Geopolitical conflicts create disturbances, revealing the logic of coal substituting for oil and gas.** Since late February, influenced by geopolitical conflicts, oil and gas prices have surged significantly, leading to a spillover of market sentiment. Coking coal, due to its dual nature as both an energy source and an industrial product, has also been affected. Since early March, coking coal futures have shown a steady but firm trend. On the night of March 20, the main coking coal futures contract experienced a sharp rise, approaching the daily limit, with trading volume and open interest increasing significantly. In the spot market, downstream coking plants and steel mills have been conducting phased inventory replenishment, coupled with traders entering the market to purchase, leading to widespread increases in coking coal spot prices of 30-100 yuan/ton recently, indicating rising market sentiment.

Coking coal, crude oil, and natural gas all possess energy attributes. From a long-term cyclical perspective, the price trends of coking coal, crude oil, and natural gas are generally consistent, as all three are driven by global energy cycles, macro liquidity, and the overall beta of commodity markets. The main pathways for coal to substitute for oil and gas are chemical replacement and energy replacement, primarily affecting thermal coal. However, due to coking coal's dual characteristics, the effects transmit to the coking coal market, with capital and sentiment shifts occurring much faster than fundamental changes. For the domestic market, the chemical replacement effect is stronger than the energy replacement effect. The impact transmission from high oil and gas prices to coking coal involves a long chain and complex logic. It should also be noted that China's coal supply is primarily self-sufficient, with imports as a supplement. The substantive impact still requires observation. The specific transmission pathways are analyzed below.

**(A) Chemical Replacement Pathway (Feedstock Attribute): Primarily replacing crude oil, supplemented by natural gas.** Transmission chain: Surge in crude oil/natural gas prices → Sharp increase in petrochemical production costs → Significant improvement in the economics of coal-to-olefins/methanol/ethylene glycol and other coal chemical processes → Increase in operating rates of coal chemical plants → Rising demand for coal used in chemical production (including coking coal blends, such as gas coal, gas-fat coal, and lean coal) → Increased coal demand from coking plants/chemical plants → Rising coking coal prices.

Domestic (Primary): China's fossil energy endowment is characterized by abundant coal, scarce oil, and limited gas. Based on the fundamental national conditions of energy security and industrial layout, China leads globally in coal chemical technology and is the world's largest producer, with modern coal chemical capacity accounting for 80%–90% of the global total. Coal demand in the coal chemical sector has grown rapidly in recent years. China's coal consumption is projected to be approximately 4.8 billion tons by 2025. Estimates indicate coal used for chemical production will be around 400 million tons by then, with modern coal chemicals primarily including methanol, coal-to-olefins, ethylene glycol, coal-to-oil, and coal-to-gas. Assuming the average capacity utilization rate in the coal chemical industry increases by 5%-10% from current levels, this would add an annualized coal consumption of 20-40 million tons, representing about 0.42%-0.83% of China's total coal consumption, indicating a non-prominent substantive impact.

International (Secondary): The proportion of coal chemicals overseas is low. Internationally, the chemical sector cannot form an effective, large-scale coal-for-oil substitution; significant transmission occurs primarily only in China.

**(B) Energy Replacement Pathway (Fuel Attribute): Primarily replacing natural gas, supplemented by crude oil.** Transmission chain: Surge in oil and gas prices → Sharp increase in power generation costs from gas/oil → Enhanced global economic attractiveness of coal power substitution → Increase in thermal coal demand/prices → Rising costs/reduced volumes of imported thermal coal into China → Shift in usage of coking coal blends → Overall valuation uplift for the coal sector → Coking coal prices follow the upward trend.

International (Primary): Natural gas holds a relatively high share in international power generation. Short-term substitution can occur by increasing the utilization hours/capacity utilization of existing coal-fired power plants to raise output and demand for thermal coal. Medium-term substitution could involve restarting idled or standby coal-fired units, but this process is longer and costlier, requiring sustained high oil prices (e.g., for two to three months or more) without signs of decline to potentially trigger restarts.

Domestic (Secondary): As China's share of natural gas power generation is very low (around 3%), and with the rapid development of new energy power generation, the substitution effect of coal power for gas power is minimal and almost negligible.

**(C) Other Influencing Factors:** 1. **Sentiment and Capital Spillover, Overall Energy Valuation Uplift:** The transmission based on fundamentals is gradual and slow, but changes in capital flows and sentiment are rapid and prone to reversals. 2. **Increased International Trade Costs:** Rising oil prices and insurance premiums increase international shipping costs, leading to higher costs for imported coal.

**Market Outlook and Strategy Recommendations** The sharp rise in coking coal futures on the night of March 20 was essentially driven by capital concentrating on an existing narrative rather than a new, unexpected positive event. It can be interpreted as catch-up or sector rotation within the context of soaring international energy prices, not driven by breaking news. The logic of coal substituting for oil and gas has been clear since late February, with coking coal showing a firm, albeit volatile, trend since early March. News cited by the market on the evening of the 21st regarding increased overseas coal demand consisted of pre-existing information, not new drivers. Coal serves as the cornerstone of China's energy security, with low external dependence. Currently, domestic coal production still has room for increase, and imports from Mongolia remain high, ensuring relatively stable coking coal supply. In summary, energy substitution is a slow variable, and the transmission path from oil/gas price increases to coking coal is long and logically complex. The significant futures price increases have already front-loaded some of the benefits of coal substitution. Subsequent core drivers will depend on the evolution of geopolitical conflicts and oil/gas price movements, warranting attention to actual incremental coal demand.

A cautiously optimistic outlook is maintained for the future, advising against chasing prices higher or attempting to call the market top. Short-term price movements are expected to be dominated by capital and sentiment, potentially further fueling spot market sentiment and leading to heightened volatility. From a risk perspective, blindly chasing rallies is not recommended, with particular caution needed regarding pullback risks triggered by profit-taking. Given the persistence of geopolitical conflicts, short-term trends are highly susceptible to exceeding expectations; thus, attempting to short the market based solely on high prices is also inadvisable. The recommended approach is primarily observation, with cautious participation in short-term speculation. Focus should be on tracking the evolution of international geopolitical situations and changes in domestic coal supply and demand, while reasonably controlling position sizes to avoid speculative risks associated with short-term price fluctuations.