China Gold: Coal Supply-Demand to Recover in Second Half 2025, Coal Price May Reverse Trend

According to our understanding, China Gold has published a research report stating that coal supply is likely to release more reasonably in the second half of 2025, with demand or marginal improvement, which may lead to a reversal trend in coal prices, helping to repair industry profitability. In the long run, core profitability is key, and China Gold expects that the mid-term coal price center will rise along with marginal costs, with resource-endowed companies potentially crossing through cycles.

China Gold's specific views are as follows:

Coal prices may rebound, but the core is still profitability sustainability. Coal prices have fallen while coal stocks remain firm, mainly due to: 1) Coal companies still having relatively good earnings capacity, 2) More relaxed asset-liability ratios, and 3) "asset drought" where dividend yields are still attractive. This is ultimately based on coal company profitability sustainability. In the long run, under cost support, China Gold does not have a pessimistic outlook on coal prices, with companies having cost advantages capable of generating sustainable profits, and the fundamental situation has good support.

Domestic power demand may stabilize growth. The State Grid Corporation forecasts that national power consumption will grow at an annual rate of around 5-6% in 2025, equivalent to a growth rate of about 6-8% in the second half. As the new energy installation boom subsides and the peak summer season's hydroelectric power performance is lower than expected, China Gold believes that the structural resistance faced by thermal power will weaken. Considering that the second-half peak season will last longer than the first half, China Gold expects that this year's second-half electricity demand will recover and improve based on the first half.

Policies favor supply rationalization. By rectifying "internal competition" and promoting coal supply releases, China Gold believes that domestic coal supply is likely to become more reasonable, with industry "quantity-based pricing" situations alleviated. This will also help reduce coal production safety risks and create a safe and sustainable development environment for the industry.

Second-half dynamic coal price rebound trend expected. Following the post-peak summer season's off-season, China Gold expects that dynamic coal prices may rebound at a certain pace, but with adjustments in October and later when heating season begins. The low point of dynamic coal prices in June or this year's low point is possible.

Ferroalloy coke price expectations rebound, but rebound sustainability depends on production reduction realization. Recent supply contraction expectations have strengthened, with demand performance exceeding expectations during the off-season. Ferroalloy coke prices hit bottom and rebounded. However, if subsequent supply reductions do not materialize and iron water production performance is lower than expected, China Gold believes that ferroalloy coke may struggle to form a reversal trend.

Risks

Policies fail to meet expectations, coal mines maintain high-intensity production; demand recovery does not meet expectations.