December 9, 2025 - The futures of coking coal and coke (collectively referred to as the "dual coke") have recently experienced selloffs due to the dual pressures of a weakening spot market and a surge in import supply.

On December 8, the dual coke continued their downtrend from last Friday’s night session, experiencing a breakdown. The declines for the coke coal contracts 2605 and 2601, and the coke contract 2601 all exceeded 6%. Notably, the main coke coal contract 2605 fell below the key level of 1100 yuan, while the 01 contract faced pressure at the 1000-yuan support level. Since November, the monthly decline of coke coal futures reached 17%, and the cumulative drop for coke futures also amounted to 11%.

Regarding this round of sharp declines, institutional analyses generally attribute the core cause to the sluggish seasonal recovery in downstream demand. Although winter has arrived, higher-than-usual temperatures in November resulted in lower-than-expected daily coal consumption by power plants, coupled with continuous inventory accumulation, which forced coal prices to revert more quickly to fundamentals. Additionally, a significant increase in imported coal further alleviated supply-side pressures, making it difficult for spot prices to remain at high levels.

Despite short-term price pressures, some institutions believe that downside potential is limited. East Money Securities pointed out that although daily coal consumption at power plants remains low year-on-year, ongoing supply optimization under the backdrop of “anti-overheating” measures and safety inspections suggests that declines will likely be controlled. Guotai Haitong stated that the cyclical bottom for the coal sector was confirmed in Q2 2025, with signs of a turning point in the supply-demand dynamic. They recommend focusing on high-dividend assets and valuation uplift opportunities brought about by adjustments to long-term coal pricing mechanisms. Market attention is gradually shifting toward potential demand releases driven by subsequent winter temperature changes and the role of the new annual thermal coal long-term agreement mechanism in supporting industry profitability.

Weak demand drags coal prices into an accelerated downturn.

The rapid decline in coal prices is directly attributed to persistently weak demand. Data from East Money Securities shows that as of December 5, Qinhuangdao Port coal prices fell by 27 yuan/ton compared to last week and 22 yuan/ton year-on-year. Price declines were even more pronounced in major producing regions: the indices for Yulin 5800 kcal, Erdos, and Datong 5500 kcal decreased by 31 yuan/ton, 38 yuan/ton, and 32 yuan/ton week-on-week, respectively.

Lower-than-expected coal consumption by power plants is the primary manifestation of weak demand. From November 28 to December 4, the average daily coal consumption of coastal and inland power plants across 25 provinces was 5.56 million tons, down 3.9% year-on-year. Although this decline narrowed compared to the previous week's 7.2%, inventories continued to accumulate. As of December 4, the average inventory of power plants reached 136.41 million tons, roughly flat year-on-year.

High operational levels on the supply side have further exacerbated the imbalance between supply and demand. At the coal economic operation analysis meeting held by the China National Coal Association on December 3, it was noted that coal supply has remained at elevated levels this year, while coal consumption experienced its first year-on-year decline since 2017. Data from key monitored enterprises show that cumulative coal sales have fallen by 2.6% year-on-year, with thermal coal and coking coal sales declining by 3.5% and 2.2%, respectively.

The continuous inflow of imported coal also exerted pressure on the domestic market. In November, Mongolia’s coal exports reached 9.35 million tons, increasing by 31.4% month-on-month, with cumulative exports from January to November reaching 79.09 million tons, a year-on-year increase of 2.2%.

High inventory levels constrain the rebound potential for prices.

The sustained accumulation of inventories at ports and production origins has become a key factor in suppressing coal prices. As of December 5th, the inventory at the four northern ports reached 17.64 million tons, an increase of 1.09 million tons compared to the same period in 2024. Although the growth rate narrowed from 2.42 million tons the previous week, the absolute level of inventory remains high.

According to Zhejiang Securities data, as of December 4th, total societal inventory stood at 182.24 million tons, increasing by 320,000 tons week-on-week, while decreasing by 5.76 million tons year-on-year. However, amid weak demand, current inventory levels have placed significant downward pressure on prices. Qinhuangdao coal inventory amounted to 6.82 million tons, surging by 820,000 tons week-on-week.

Inventories along the coking coal industrial chain are similarly under pressure. Jingtang Port's coking coal inventory reached 2.0294 million tons, increasing by 49,000 tons week-on-week, representing a rise of 2.47%. The total inventory of independent coking plants was 7.9809 million tons, with available days of stock at 12.88 days.

East Money Securities believes that the continuous accumulation of inventory, coupled with sluggish demand recovery, is the direct cause of the accelerated decline in coal prices. However, considering that the peak demand season has yet to arrive, along with ongoing supply-side optimization driven by 'anti-overcompetition' measures and stringent safety supervision, the overall decline in coal prices is expected to be limited.

Market expectations diverge regarding winter demand.

Despite current downward pressure on coal prices, brokers’ views on future market trends are markedly divided, with the core disagreement centering on the assessment of winter demand.

East Money Securities pointed out that, in the short term, average temperatures in December may remain flat compared to historical averages, suggesting that demand still has upward momentum. The China Meteorological Administration stated that most regions would experience near-average or above-average temperatures in December, except for parts of northeastern China and eastern Inner Mongolia, where temperatures are expected to be lower. Looking ahead to next year, the institution believes there is room for demand growth, while supply remains relatively stable but subject to possible disruptions. The supply-demand situation may shift from relatively loose to essentially balanced or periodically tight.

Guo Hai Tong Securities assesses that the cyclical bottom of the coal sector was confirmed in the second quarter of this year, with a reversal inflection point in the supply-demand dynamics already evident. The institution believes that the key to stabilizing coal prices lies in subsequent winter demand. If temperatures drop more than expected between December and January, residential electricity demand could see a short-term spike, driving up coal consumption at power plants.

Zheshang Securities maintains a 'positive' rating for the industry but highlights the reality of high inventories suppressing coal prices. The institution notes that despite efforts to ensure supply and increase production, capacity constraints remain. A supply-demand gap is still anticipated, with possible coal shortages in certain regions during specific periods. After a short-term inventory rebound, inventories are expected to decline, and the average coal price in the fourth quarter may rise.

The new long-term agreement mechanism may underpin industry profitability.

The introduction of the new mechanism for long-term coal contracts in 2026 has provided policy support to the market. On November 19, the National Development and Reform Commission (NDRC) issued a notice on the signing and fulfillment of medium- and long-term coal contracts for 2026, clarifying contract formats, pricing benchmarks, and compliance supervision methods.

Guo Hai Tong Securities points out that the requirements for signing long-term coal contracts for the new year have been further relaxed compared to the previous year, especially for pithead long-term agreements, which have become more market-oriented. The pricing mechanism, previously capped at RMB 770 per ton for annual port long-term agreements minus freight costs, has been adjusted to monthly adjustments based on four major indices, aligning with the monthly adjustment mechanism at ports.

The institution believes that while raising the cap, adjustments to long-term coal agreements also ensure higher compliance rates for the industry during cyclical lows, which is more conducive to sector valuation improvement. The China Coal Transportation and Marketing Association predicts that coal consumption in China will peak during the '15th Five-Year Plan' period and will only enter a more pronounced decline phase after experiencing a peak plateau of approximately 10 years.