GLMS SEC released a research report stating that domestic coal supply continues to contract, leading to rapid and sustained depletion of port inventories after the New Year and a rise in coal prices. Overseas factors and increased demand for coal chemicals serve as additional catalysts, further pushing up the central price level of coal. The report suggests that the coal industry is expected to return to a basic supply-demand balance seen in 2023–2024, with prices fluctuating seasonally within the range of 800–1,000 yuan per ton. Recent sharp increases in chemical product prices highlight the importance of focusing on investment opportunities in coal chemical companies. The report recommends the following investment themes: 1) companies with high exposure to spot prices offering greater elasticity; 2) companies with coal chemical production capacity. Key views from GLMS SEC are as follows:
Recent events show that coal prices declined due to off-season demand for thermal coal, but as of March 18, the spot price of 5,500 kcal thermal coal at Qinhuangdao Port has stabilized, supported by non-power demand and low inventory levels. On March 13, China Shenhua Energy announced the completion of the transfer of assets related to its acquisition.
Domestic supply contraction remains the main driver for higher coal prices, while overseas factors and rising coal chemical demand provide additional support. Since the National Energy Administration launched production verification by the end of July 2025, domestic supply has continued to shrink due to voluntary output reductions at overproduction mines and the conversion of some supply-guarantee capacity into reserve capacity. This has resulted in rapid and continuous destocking at ports and rising coal prices after the New Year. Approximately 200 million tons of capacity have yet to complete capacity replacement and environmental approval procedures, posing future risks of output reduction. Therefore, the report is optimistic about the steady upward movement of coal prices driven by gradual supply contraction. Overseas factors and rising coal chemical demand will further lift the price floor.
On one hand, soaring European gas prices have increased the cost of gas-fired power generation, leading European power plants to restart coal-based generation. This has significantly boosted global coal demand, pushing up international coal prices. Combined with expectations of production cuts in Indonesia and a widespread price inversion for imported coal, domestic coal prices are strongly supported. On the other hand, high oil prices have substantially raised costs for oil-based chemical production, and with supply constraints in the Middle East, coal-based chemicals have become more cost-competitive, leading to steadily growing downstream demand.
In summary, the report believes the coal industry is likely to return to a basic supply-demand balance similar to 2023–2024, with prices recovering to the 800–1,000 yuan per ton range and moving seasonally.
Investment opportunities in coal chemicals deserve attention. With the completion of China Shenhua's acquisition, the company's polyolefin capacity will increase from 600,000 tons to 1.88 million tons, a rise of 213.3%. From 2023 to 2025, China's coal consumption for chemical production is projected to reach 304 million, 325 million, and 362 million tons, representing year-on-year growth rates of +9.4%, +6.9%, and +11.5%, respectively. The report estimates that under-construction new coal chemical projects (including coal-to-liquids, coal-to-gas, and coal-to-olefins) will require approximately 243 million tons of coal, while planned projects have potential demand of about 561 million tons—double the current level. This suggests sustained high growth in coal consumption for chemical use.
Recent surges in chemical product prices not only improve profit potential for coal chemical firms but also, amid rising energy security concerns due to geopolitical conflicts and expected faster approval of new coal chemical projects in China, may lead to valuation upgrades driven by strong growth prospects. Investors are advised to focus on coal chemical investment opportunities.
On March 13, China Shenhua announced the completion of its asset acquisition. Post-acquisition, the company's polyolefin capacity will expand significantly, and its chemical segment is expected to demonstrate strong growth. Additionally, the company benefits from a high proportion of long-term coal contracts, integrated operations, stable earnings during coal price downturns, and high dividend payouts, supporting continued valuation growth.
For investment recommendations, the report suggests the following themes: 1) companies with high spot price exposure and elasticity, such as Lu'an Environmental Energy, Jinneng Holding Coal Industry, Shanxi Coal International Energy, Shaanxi Coal Industry, and Huayang Energy; 2) companies with coal chemical capacity, including China Shenhua Energy, Yankuang Energy, China Coal Energy, Huaibei Mining, and Lanhua Sci-Tech.
Risk warnings include: 1) weaker-than-expected downstream demand; 2) sharp declines in coal prices; 3) changes in government policies.