Fangzheng Securities: In the long run, the increase in coal supply is still limited, and coal prices are expected to rise further in the future

The Zhitong Finance App learned that Fangzheng Securities released a research report saying that after the production area inspection and overproduction documents were issued, the impact on coal price sentiment was quite obvious. Coking coal futures once rose to 1,313 yuan/ton, and as of August 22, the main coking coal port price had risen to 1,610 yuan/ton. Previously, steel mills and coking plants maintained the procurement they had just needed, and their coking coal stocks were not high. As expectations of rising coking coal prices increased, downstream began to grab stocks, while ports quickly went to storage. Coal prices are expected to rise further in the short term as supply-side tightening and port inventories are eliminated. In the long run, Mongolian coal may increase by 30 million tons, but as China's domestic coking coal supply side continues to tighten, the future increase in China's total coking coal supply will still be limited, and major coking coal companies with high strength coal quality will still have long-term investment value.

The main views of Fangzheng Securities are as follows:

Mongolia's coal production increases with China's import demand

China's dependence on coking coal imports has increased in recent years, accounting for 20.6% of imports in 2024. Among them, Mongolian coal is the main source of coking coal imports from China. In 2023, Mongolian coal imports account for more than half of China's coking coal imports, and the proportion is close to 47% in 2024 and the first half of 2025. With the gradual liberalization of China's import restrictions and the increase in import demand, Mongolia's coal production also continues to rise. Mongolian coal is mainly exported to China, accounting for more than 90%. Previously, the proportion of Mongolian coal exports to China was over 96%. Due to the decline in China's enthusiasm for importing Mongolian coal in 2025 and the emergence of storage of Mongolian coal, the proportion of Mongolian coal exports to China declined in the first half of the year.

The China-Mongolia Cross-border Railway provides capacity, and the increase in supply is still limited in the long run

Mongolia mainly relies on road transportation. According to Mongolian freight data in 2024, road transport accounts for 65%. In September 2022, Mongolia built a railway from Tawang Tauragai to Gashusu Haitu. A large number of goods were transported to the Gashusu Haitu port, but the railway did not reach the border between China and Mongolia. The coal mine in Tawantauregai and the copper and gold mine in Oyu Tauragai were transported by rail to the Gashusu Sea Map, and then transported to China via a short shuttle by road. In 2025, as coal prices fell and Mongolia's coal exports to China declined, the Mongolian authorities accelerated logistics trade with China, and the Gashun-Suhaitu-Ganqimaodu Port Railway was put back on the agenda. On May 14, 2025, the second cross-border railway between China and Mongolia, the Ganqimaodu to Gashusu Haitu Railway, officially began construction. The railway has an annual transportation capacity of 30 million tons. After completion, the annual customs clearance capacity of the Ganqimaodu border crossing is expected to double. At present, there is still uncertainty about the progress of the promotion of several other railways, and it will take a long time to implement them.

Recently, Mongolian coal customs clearance has bottomed out and rebounded, and the short term is still limited by capacity

As of June 20, Mongolia's coking coal flow rate was 82.42%. Under the high current ratio, Ganqimaodu coal imported about 17.07 million tons in the first half of 2025, or -15.9% year-on-year. However, due to the recent rise in coal prices, the enthusiasm of traders participating in the auction has begun to increase. At the same time, the number of customs clearance trips at Ganqimaodu Port was significantly higher than in June. In July 2025, China imported 4.98 million tons of Mongolian coking coal, which increased month-on-month but still decreased year-on-year. The bank believes that the current customs clearance volume of Mongolian coal has only returned to normal levels, and the upper limit is still limited by capacity. The bank calculated that the warehouse cost for coking refined coal was about 1,429 yuan/ton, corresponding to the closing price of the goods on August 22, which was 267 yuan/ton. In the short term, the bank believes that Mongolian coal customs clearance has returned to normal levels, and the upper limit is still limited by capacity. In the long run, due to the long time it takes to plan the railway until it is completed and put into operation, it will still take a long time for the three railways, including Sibékulen-Cek, to land.

Risk warning: risk of production safety, risk of changes in the international situation, risk of macroeconomic fluctuations, risk of large fluctuations in commodity prices.