Coal prices at ports continued their upward trend last week, though the pace of increase slowed slightly in the latter half of the week. The primary driver behind this rally has been supply constraints due to production inspections, leading to an unexpected rebound in thermal coal demand during the typically transitional period of October.

Since July 2025, China's monthly raw coal output has seen year-on-year declines of 3.8%, 3.2%, and 1.8%, respectively. With inspection teams set to intensify oversight in November, expectations of further supply tightening are growing.

On the demand side, as temperatures drop in southern regions, power plant consumption is nearing its trough and is expected to rise. Some northern areas have already begun heating earlier than usual, with full-scale heating demand anticipated by mid-November. This seasonal demand surge, combined with potential supply disruptions from safety inspections, could amplify upward pressure on coal prices.

In the near term, severe cost inversion in transportation may limit port arrivals even after the Daqin Line maintenance concludes, making a significant price drop unlikely. However, the pace of increases may moderate temporarily before winter demand peaks, potentially pushing prices above CNY 900/ton by year-end.

For investors, the coal sector's improving supply-demand dynamics favor companies with high spot exposure. Notably, Shanxi-based firms, having completed overproduction controls in 2024, remain least affected by current output restrictions.

**Coking Coal Strengthens Amid Supply Disruptions** Production halts at open-pit mines in Wuhai due to slope remediation and resource restructuring, alongside stricter environmental checks, have tightened supply. Additional reductions in Shanxi's Linfen and Lüliang regions further constrain output. With coke prices set for a second round of hikes and steelmaking demand holding steady, coking coal prices retain upside potential.

**Investment Recommendations** 1) **High spot-exposure plays**: Lu'an Environmental Energy (601699.SH), Yankuang Energy (600188.SH). 2) **Stable earnings & growth**: Jincoal Energy (601001.SH), Huayang Energy (600348.SH). 3) **Output recovery**: Shanxi Coal International (600546.SH). 4) **Industry leaders**: China Shenhua (601088.SH), China Coal Energy (601898.SH), Shaanxi Coal (601225.SH). 5) **Nuclear-linked uranium**: CGN Mining (01164.HK).

**Risks**: Weak downstream demand, sharp coal price corrections, policy shifts.