June 6, 2025 - According to the Zhitong Finance APP, Guosen released a Research Report stating that as the peak season approaches, the price of thermal coal halted its decline at the end of May, and a rebound in the peak season is imminent, with inventory levels and daily consumption determining the extent of the rebound; the price of coking coal, however, continues to probe for a bottom. In terms of thermal coal, prices continued to fall during the consumption off-season in May, but as the peak season approaches at the end of the month, market sentiment warmed up and coal prices leveled off. Looking ahead to June, daily consumption entered an upward channel, and coal prices are expected to rebound; however, attention must still be paid to daily consumption, water inflow, inventory reduction, and coal import conditions. Currently, daily consumption is in an upward trend supporting the rebound in coal prices, and the Sector has already reached a relatively bottom position after earlier adjustments, suggesting to pay attention to left-side layout opportunities.

Guosen's main viewpoints are as follows:

In terms of supply

In April 2025, domestic supply significantly decreased, with national raw coal production increasing year-on-year by about 18 million tons, but decreasing by about 51 million tons compared to the previous month; as of May 25, the cumulative output from sample coal mines in May slightly increased year-on-year, but decreased slightly month-on-month. In terms of domestic production, from January to April 2024, the cumulative national raw coal production reached 1.58 billion tons, a year-on-year increase of 6.6%; among which in April, the national raw coal production was 0.39 billion tons, a year-on-year increase of 3.8% and a month-on-month decrease of 11.6%; by production area, the output in main producing areas has decreased month-on-month, but only Inner Mongolia experienced a year-on-year decrease.

In April, the coal import volume decreased by 2.3% month-on-month and 16.4% year-on-year, maintaining a relatively low level; and prices remained inverted, with import volumes expected to stay relatively low. In terms of imports, from January to April, domestic imports of coal and lignite reached 0.15 billion tons, a year-on-year decrease of 5.3%; among which in April, imported coal and lignite totaled 37.83 million tons, a year-on-year decrease of 16.4%. By region, imports of Indonesian coal significantly decreased month-on-month, while Australian coal increased. In addition, in the first half of May, the reference price for Indonesian thermal coal HBA was fully raised, and in the second half of May, the HBA for Indonesia's main imported low-calorie coal saw a slight increase, with import volumes expected to remain relatively low.

In terms of demand

As April gradually enters the off-season for demand, overall, except for the strong demand for Chemical coal, pig iron output is relatively high, and the demand at the steel smelting end is acceptable, but the demand for power coal and Cement is not good. In general, the demand for Commodity coal in April has declined month-on-month, with growth narrowing. From January to April, the national Commodity coal consumption was 1.66 billion tons, an increase of 0.3% year-on-year; in April, the national Commodity coal consumption was 0.39 billion tons, an increase of 0.7% year-on-year. Looking at downstream, the total electricity consumption in April increased by 4.7% year-on-year, with a slight decline of 0.1 percentage points compared to March. The total power generation of large-scale enterprises in April increased by 0.9% year-on-year, with a month-on-month decline of 0.9 percentage points compared to March, where New energy showed significant growth, hydropower turned negative year-on-year, and thermal power maintained -2.3% year-on-year.

The demand for Chemical coal remains high. As of May 30, the year-on-year increase for 2025 in coal-based PVC, coal-based ethylene glycol, and coal-based Methanol was 2.3%, 14.1%, and 12.6% respectively. From January to April, the cumulative output of synthetic ammonia increased by 7.2% year-on-year, with a year-on-year increase of 6.8% in April. Coking coal prices declined, and the profitability of downstream coking and steel companies remains acceptable, leading to high production enthusiasm. The crude steel output in April was flat year-on-year, while steel exports grew by 13.4% year-on-year. The downstream demand is weak, with Cement production showing a negative year-on-year change in April.

In terms of inventory, Port and key coal mine inventories are at high levels, while power plant inventories have slightly declined from high levels. Mainstream port inventories remain high, with the decrease in northern port inventories primarily due to limited inflow. Coal mine inventories are around 11 million tons higher than the same period last year. The six major power generation groups' inventories have slightly decreased year-on-year. With rising temperatures, the inventory coal has risks of spontaneous combustion and declining calorific value. Currently, there is still significant pressure on port clearance, and the future reduction of port inventories remains a major factor affecting coal prices. As the peak season for downstream demand approaches, coking coal port inventories are decreasing; downstream (coking plants/steel mills) profits are acceptable, production enthusiasm is high, and inventories have increased somewhat, but overall, it remains stable for essential procurement. However, the downstream is gradually entering the production off-season, pig iron output is decreasing, and rigid demand is declining, so inventory is expected to decrease.

In terms of prices, as the peak season approaches, at the end of May, the price of power coal halted its decline, and a rebound in the peak season is imminent. The level of inventory reduction and daily consumption will determine the extent of the rebound; coking coal prices are probing for a bottom. In terms of power coal, prices continued to decline during the consumption off-season in May, but as the peak season approaches at the end of the month, market sentiment has improved, halting the decline in coal prices. Looking forward to June, daily consumption has entered an upward trend, and coal prices are expected to rebound; however, attention must still be paid to daily consumption, incoming water, inventory reduction, and coal import situations. For coking coal, the supply side remains loose, prices are still probing for a bottom, and as the downstream enters the demand off-season, coupled with price pressure from low-cost Mongolian coal imports, price pressures are increasing.

Investment advice

Currently, daily consumption is entering an upward channel, supporting a rebound in coal prices, and the Sector has already reached a relatively bottom position after earlier adjustments, suggesting to look for opportunities on the left side for layout. Attention should also be paid to port inventory reduction levels, incoming water, and other situations. Key focus areas should include (1) leading coal companies with stable performance: China Shenhua Energy (601088.SH), China Coal Energy (601898.SH), Shaanxi Coal Industry (601225.SH); (2) symbols of steady growth: Inner Mongolia Dian Tou Energy Corporation (002128.SZ), Jinneng Holding Shanxi Coal Industry (601001.SH), Huaibei Mining Holdings (600985.SH); (3) leading coal machinery company Tiandi Science & Technology (600582.SH).

Risk Warning

Overseas economic slowdown; massive capacity release; substitution by New energy Fund; impact of safety incidents.