Heightened tensions in Iran have disrupted shipping through the Strait of Hormuz, impacting global supplies of oil, gas, and chemical products. This could drive up prices for these commodities, stimulate demand for coal-based chemical production in China, and increase the cost of gas-fired power generation, thereby encouraging a marginal shift from gas to coal in the power sector. Long-term, as global geopolitics become more complex, supply security for upstream resources like energy will grow increasingly vital. As a cornerstone of energy security and a key raw material for chemicals, the strategic importance of coal resources to China is rising, potentially leading to a revaluation of high-quality coal assets.
Demand for coal chemicals in China may see further support. Taking methanol as an example, China's methanol capacity in 2024 reached 109.776 million tonnes, with production of 91.822 million tonnes and imports of 13.494 million tonnes, resulting in an import dependency of 13% (imports/apparent consumption). Rising oil and gas prices are expected to support chemical product prices like methanol. Additionally, structural reductions in methanol supply from the Middle East could benefit domestic Chinese supply, supporting an increase in coal demand for methanol production.
Disruptions to natural gas supply may stimulate coal demand. The situation in Iran affects global LNG supply. Qatar, a major LNG exporter, shipped 106.9 billion cubic meters in 2024, accounting for 20% of global exports. Shipping disruptions in the Strait of Hormuz increase uncertainty around Qatar's LNG exports, potentially pushing up global gas prices. If disruptions last longer than expected, power generators may increasingly substitute coal for gas.
Coal imports could decline. Although the final extent of production cuts in Indonesia is not yet confirmed, the Indonesian government's plan to increase the Domestic Market Obligation (DMO) for coal producers suggests that even if production cuts are smaller than initially planned, a reduction in exports is likely. Against this backdrop, Asia-Pacific thermal coal prices continue to rise, creating a significant price inversion with domestic Chinese prices, which may increase pressure on coal imports.
In terms of investment targets, rising coal prices are expected to boost profitability in the coal sector. Recommended stocks include Yankuang Energy (600188.SH, 01171), Yancoal Australia (03668), China Coal Energy (601898.SH, 01898), and Shaanxi Coal Industry (601225.SH). Key risks include significant escalation or de-escalation of geopolitical tensions and unexpected increases in domestic supply.