Zhongtai Securities: Trading and fundamentals resonate, optimistic about investment opportunities in the coal sector in 2026

The Zhitong Finance App learned that Zhongtai Securities released a research report saying that trading aspects and fundamentals resonate, coal may usher in a new cycle. It is optimistic about investment opportunities in the coal sector in 2026, and the investment side suggests grasping the three main lines. Based on the continued entry of medium- to long-term capital into the market, the “high dividend and undervaluation” investment value of coal is further highlighted, and targets with strong dividend attributes are actively allocated; based on the company's own production capacity growth logic, the focus is on the expected benefits of alpha and beta resonance; based on coal prices bottoming out and profit improvement, coking coal, which focuses on reversing the difficult situation, is expected to benefit.

The main views of Zhongtai Securities are as follows:

Price recovery: low and high back, and the fluctuation intensified.

Coal prices dropped significantly year-on-year from January to November 2025, but after prices bottomed out in June, they ushered in a round of increases, showing an overall trend of low and high trends. Spot price: Thermal coal price center (Q5500) 695 yuan/ton, down 19% year on year; coking coal price center was 1,497 yuan/ton, down 28% year on year. Changxie price: Q5500 price in Qinhuangdao was 678 yuan/ton, down 3% year on year; Henan main coking coal price was 1,546 yuan/ton, down 27% year on year. With a marginal improvement in supply and demand in the second half of 2025, coking coal prices fluctuated and strengthened amid seasonal fluctuations.

Looking ahead to the future market: the improvement in supply and demand is sustainable, and the price center will rise.

Supply side: “Pre-approval to increase production capacity” was withdrawn, and expectations of supply contraction strengthened.

1) The normalization of production safety and the withdrawal of production capacity and weakening supply. Production safety regulations were tightened before and after 2025. The scale of raw coal production across the country increased steadily, but there was a marked decline in the second half of the year. The “anti-internal roll” policy and “overproduction verification” promoted the industry's self-regulation of production, and the supply of raw coal contracted markedly starting in July. There is still uncertainty about whether the pre-approval policy to increase production capacity will continue until the “15th Five-Year Plan,” and the processing of coal mine nuclear increase procedures has become a real problem that enterprises have to face. In 2026, the bank believes that the pre-approved increase in production capacity may withdraw by more than 100 million tons, leading to a contraction in domestic supply.

2) The limited increase in imported coal and the dynamic balance of price guidance. Along with the decline in domestic coal prices, compounded by interference from Indonesia's HBA pricing policy, the internal and external price spread widened in stages, and the scale of imported coal declined definitively in 2025 (in January-October, the country imported 387.623 million tons of coal, a year-on-year decrease of 11%). The role of imported coal as a “regulator” of domestic supply remains unchanged. Against the backdrop of no significant changes on the policy side, prices guide the dynamic balance. It is expected that the increase in the scale of imported coal will be limited in 2026.

3) Capacity restrictions and the increase in the scale of coal exports from Xinjiang are already fatigued. In 2025, the Xinjiang Railway Department made every effort to guarantee the export of coal from Xinjiang through measures such as prioritizing guaranteed capacity, designing multimodal transport routes, increasing delivery time limits, and reducing railway freight rates, and striving to complete the 100 million ton coal export task throughout the year. From January to October 2025, the scale of coal production in Xinjiang was 445 million tons (+2.8% /growth rate 17.5% in 2024) and 85.18 million tons (+6.4% /growth rate of 50.5% as of November 25/2024). The growth rate slowed significantly.

Demand side: Demand for electricity and coal is expected to return to growth, and non-electricity demand can be expected to be resilient.

Downstream coal demand differentiation increased. From January to October 2025, demand growth rate was 10.9% for chemicals > 0.2% for steel > -1.1% > for building materials, and -4.9% for electricity and building materials.

1) Electricity: Demand for coal consumption in the electricity sector is expected to return to increase year-on-year in 2026. From January to October 2025, the country's power generation increased 2.3% year on year. Among them, thermal power, hydropower, nuclear power, wind power, and photovoltaics increased by -0.4%/1.6%/8.7%/7.6%/232%, respectively. The year-on-year decline in thermal power dragged down demand for coal. According to estimates, under the premise of optimistic assumptions about clean energy output, the bank expects that if the growth rate of power generation exceeds 3% in 2026, coal consumption for coal-fired power is expected to continue to increase year-on-year.

2) Steel: Steady growth plans may support coal consumption demand for steel. The Ministry of Industry and Information and other departments announced the “Work Plan for Steady Growth of the Steel Industry (2025-2026)”. The goal is to increase the value added of the steel industry by an average of about 4% per year from 2025 to 2026. The restructuring of the global trade structure+construction of a circular economy in China in 2026 is expected to drive an increase in steel demand. The average daily iron and water production is expected to remain high at 2.4 million tons for a long time in 2026, and the scale of steel exports will remain high, thus driving the increase in demand for coal.

3) Chemicals: Demand for coal consumption in modern coal chemicals will continue to grow. Since the 14th Five-Year Plan, against the backdrop of high global energy prices, China's demand for chemical coal consumption has maintained rapid growth. Looking ahead to the future market, based on China's strategic position to vigorously develop coal chemicals, crude oil prices are expected to operate at a high level, and the current situation where coal chemical project construction is progressing, it is expected that demand for coal consumption in the coal chemical industry will continue to grow in 2026.

4) Building materials: Infrastructure investment is strong, and the impact of building materials is weakening. Real estate from January to October 2025, the average floor price of land traded in 100 large and medium-sized cities changed year on year, and the year-on-year decline in planned construction area of the land sold narrowed. The trend of weak real estate recovery continued, but signs of marginal stabilization loom. Meanwhile, from January to September 2025, an additional special bond of 3.7 trillion yuan was arranged, an increase of 2.0% over the previous year, and the amount of new physical work is expected to increase. The impact of the building materials industry on coal consumption demand is expected to continue to weaken in 2026.

Risk warning: Risks such as demand falling beyond expectations, risk of extreme weather shocks, risk of trustworthiness of third-party data, and untimely update of research report usage information.