Gf Securities released a research report stating that coal prices declined in 2025, leading to a 42% drop in industry profits, but profitability is expected to improve in 2026. The overall prosperity of the coal industry retreated in 2025, although supply and demand began shifting from a surplus to a basic balance in the second half of the year. Entering 2026, the growth rate on the supply side is anticipated to decrease significantly compared to earlier periods; concurrently, considering that demand was constrained in 2025, there is substantial room for improvement in 2026, leading to an expectation that the central price level of coal will steadily rise. According to the National Bureau of Statistics, the total profit of the coal mining industry in 2025 was 352 billion yuan, a year-on-year decrease of 42%. Some companies have already disclosed performance forecasts, indicating stable production and sales volumes with rising prices in the fourth quarter, although costs, taxes, and fees had some negative impacts. It is projected that profit expectations for the industry will improve in 2026, with the sector's valuation and dividend yield advantages being particularly pronounced.
A review of the coal sector shows it led the market in January, cumulatively outperforming the broader market by 6.7 percentage points since the start of the year. According to Wind data, from the beginning of the year until January 30th, the coal sector rose by 8.3% cumulatively, outperforming the CSI 300 Index by 6.7 percentage points and ranking 7th out of 30 CITIC industry indices. Currently, the overall price-to-earnings and price-to-book ratios have entered the medium-to-high range of historical levels, with the price-to-earnings ratio ranking 5th out of 30 in the entire market.
The coal market review for 2025 indicated a supply-demand surplus; specifically, electricity consumption in December was flat year-on-year, non-power demand was weak, coal imports increased by 12% year-on-year, while prices stabilized with a slight increase in January. (1) Domestic coal prices: Thermal coal prices were relatively stable in January, while coking coal prices stabilized and recovered. (2) International coal prices: Coking coal prices saw significant increases in January, with thermal coal also experiencing minor gains. (3) Domestic demand: Electricity consumption in 2025 grew 5.0% year-on-year; demand from thermal power, steel, and cement sectors was weak, while chemical industry demand was relatively strong. (4) Domestic supply: China's raw coal output increased 1.2% year-on-year in 2025, while imports fell 9.6% year-on-year. (5) Overseas supply and demand: Global seaborne coal loading volumes decreased 2.8% year-on-year in 2025, although demand in emerging markets was generally positive. (6) Industrial chain inventory: During the peak consumption season in January, thermal coal inventories at midstream and downstream levels declined, and coking coal inventories were also at medium-to-low levels. (7) Policy and corporate developments: The 2026 long-term contract policy has been finalized; since the fourth quarter of 2025, safety supervision has generally tightened, continuously restricting production.
Recent market dynamics show thermal coal prices stabilizing and rebounding, with the first round of coke price increases being successfully implemented. (1) Thermal coal: Recent daily consumption has remained at medium-to-high levels; high inventory levels from late January to early February are expected to continue being drawn down, while supply is generally tightening approaching the Spring Festival, suggesting coal prices are likely to remain broadly stable. (2) Coking coal: The coking coal market remains in a seasonal demand lull; however, pig iron production increased after the New Year's Day holiday, and coke oven operating rates have improved compared to earlier periods, indicating resilience on the demand side. Coking coal production is expected to decline steadily going forward, with prices anticipated to remain fundamentally stable. (3) Coke: The first round of coke price increases was smoothly implemented, with downstream procurement sentiment generally positive, suggesting coke prices are likely to stabilize with a potential for increase.
Key companies to watch include: (1) Thermal coal companies with stable profit distribution: China Shenhua Energy (A, H), Yankuang Energy Group (A, H), Shaanxi Coal Industry, China Coal Energy (A, H), Inner Mongolia Dian Tou Energy, JinKong Coal Industry, etc. (2) Companies with high elasticity benefiting from rising coal prices: Huaibei Mining, Shanxi Coking Coal, Lu'an Environmental Energy, Shougang Resources, Yancoal Australia, Pingdingshan Tianan Coal Mining, Shanxi Coal International Energy, etc. (3) Companies with outstanding medium-to-long-term growth potential: Huayang Energy, Xinji Energy, Baofeng Energy Group, China Qinfa, etc.
Risks include coal and coke prices falling more than expected, progress in capacity construction lagging behind schedule, inadequate control of costs and expenses, and performance falling short of expectations.