Group 1 - The core viewpoint of the article highlights a significant increase in coal stocks, driven by rising coking coal prices following a price adjustment by major steel mills in East and North China [1] - China Shenhua (01088) saw a rise of 3.44% to HKD 36.7, Yanzhou Coal (01171) increased by 3.13% to HKD 9.56, Mongolian Energy (00276) rose by 2.99% to HKD 0.69, and China Coal Energy (01898) gained 2.09% to HKD 10.24 [1] - The fifth round of coking coal price increases has been fully implemented, with cumulative price rises of 250-275 CNY/ton [1] Group 2 - Coking coal futures prices surged, with the main contract reaching a near 7% increase after a significant rise on Monday [1] - Guotai Junan noted that the National Energy Administration's stance on "anti-involution" in the coal industry, combined with a price pressure of 650 CNY/ton, is likely to lead to a stable yet declining total supply [1] - GF Securities reported that since early July, coal prices have risen by 450 CNY/ton or 37%, returning to the highest levels since the beginning of the year [1] Group 3 - Despite entering a demand off-season, steel mills maintain high operating rates and iron output, while market speculation has improved due to expectations of anti-involution [1] - The company anticipates that while the coal price center may decline in 2025, profits in the second quarter may have reached a bottom, with a steady recovery expected in the second half and medium to long term [1] - The sector's valuation and dividend yield are considered advantageous [1]

Report Overview 1. Report Industry Investment Rating - No information provided on the report industry investment rating. 2. Report's Core View - The report predicts that both coking coal and coke futures will operate strongly in the short - term, with coking coal showing a short - term strong trend, medium - term oscillation, and an intraday rise, and coke also having a short - term strong trend, medium - term oscillation, and an intraday rise [1]. 3. Summary by Related Catalogs Coking Coal (JM) - **Price and Market Performance**: On August 5, the main coking coal contract closed at 1182 points, rising 6.92% intraday. The position of the main contract was 526,300 lots at the close, with a net increase of 38,314 lots compared to the previous trading day. The latest price of Mongolian coal at the Ganqimaodu Port was 1150 yuan/ton, down 0.9% week - on - week, and the cost of the equivalent futures warehouse receipt was about 1126 yuan/ton [5]. - **Core Logic**: There are continuous disturbances from over - production inspections in Shanxi, and the atmosphere in the coking coal futures market has warmed up. The supply - demand pattern of coking coal remains unchanged this week, with supply stronger than demand and insufficient fundamental support. The medium - and long - term supply contraction expectation dominates the market trend. It is expected that coking coal futures will maintain a strong operation in the near future [5]. Coke (J) - **Core Logic**: The resurgence of anti - involution news in the coal industry has improved the atmosphere in the coke futures market, and the main contract rose at the end of the session. This week, coke supply stabilized while demand declined slightly, and the fundamentals still face some pressure. However, the profitability rate of downstream steel mills has improved month - on - month, and iron - making output has shown some resilience. The seasonal decline is relatively moderate. The fundamentals of coke have not changed much, and the resurgence of anti - involution news has restored market optimism, leading to a return to strong operation [6].

Core Insights - The report highlights that the coal prices for thermal and coking coal are expected to continue rising due to the "anti-involution" measures and capacity checks in the industry [2][6][10]. Group 1: Industry Hot Events Review - Key events in July include the implementation of the new Mineral Resources Law, which emphasizes the dual focus on development and protection, and the initiation of capacity checks in major coal-producing provinces [5][7]. - The National Energy Administration has begun a special inspection of coal mines in key provinces to ensure production does not exceed announced capacities [7][14]. - The coal industry is experiencing a shift towards higher-end, intelligent production methods, as indicated by recent inspections and government encouragement for transformation [9][10]. Group 2: Supply Side Analysis - Domestic coal production growth is slowing, while import growth is also declining, indicating a tightening supply situation [6][26]. - The report notes that the number of coal mines is decreasing, with a significant concentration of production capacity in larger, more advanced mines [12][39]. - The average cost of coal production has shown significant variation among different mining companies, impacting overall pricing strategies [12][10]. Group 3: Demand Side Analysis - There is a marginal improvement in demand for thermal coal, driven by recovery in steel profits, which is expected to support coking coal prices [6][26]. - The report provides a supply-demand balance table, indicating that coal consumption is projected to grow slightly, while production is expected to stabilize [27][39]. Group 4: Investment Analysis - The report suggests that the seasonal adjustments in national railway freight rates could lead to increased volatility in coal prices, with potential for rapid price increases during peak demand seasons [15][17]. - The low yield of ten-year government bonds enhances the attractiveness of coal companies with high dividend yields, suggesting a favorable investment environment [19][20]. - The anticipated policy changes in Indonesia regarding coal production quotas are expected to stabilize coal prices by aligning actual production with target outputs [21][25].

Group 1: Report Industry Investment Rating - Not provided Group 2: Core Views of the Report - The market sentiment was reignited by the news of strict inspections on over - production in Shanxi coal mines, and the far - month contracts of coking coal hit the daily limit first. The strengthening of the reverse spread of coking coal 9 - 1 reflects concerns about near - month delivery pressure and strong expectations for far - month valuations. The "anti - involution" policy may be hyped repeatedly, and the coking coal futures price is expected to be more volatile. The report is not pessimistic about the medium - and long - term trends of coal and coke. Attention should be paid to macro events at home and abroad such as the military parade, the Fed's interest rate cut game, and the Fourth Plenary Session. Investors without spot handling ability are not recommended to participate in the delivery game near the 09 contract delivery. The previously recommended coking coal 9 - 1 reverse spread can consider taking profits, and it is recommended to temporarily observe the 09 on - disk coking profit [4]. Group 3: Summary by Relevant Catalogs 1. Price Forecast and Risk Management Strategy - **Price Forecast**: The monthly price range for coking coal is predicted to be 950 - 1350, with a current 20 - day rolling volatility of 32.68% and a historical percentile of 63.87%. For coke, the monthly price range is 1480 - 1900, with a current 20 - day rolling volatility of 25.37% and a historical percentile of 49.13% [3]. - **Risk Management Strategy**: For the arbitrage scenario of monthly spread arbitrage with no spot exposure, the recommended strategy is to short the coking coal 9 - 1 spread (jm2509&jm2601), with a suggested entry range of (- 40, - 30) [3]. 2. Black Warehouse Receipt Daily Report - On August 5, 2025, compared with August 4, 2025, the warehouse receipts of rebar increased by 5723 tons to 88363 tons, hot - rolled coil remained unchanged at 55998 tons, iron ore remained unchanged at 3600 hands, coking coal decreased by 500 hands to 0 hands, coke remained unchanged at 760 hands, ferrosilicon decreased by 112 sheets to 21930 sheets, and silicomanganese decreased by 243 sheets to 77611 sheets [3]. 3. Core Contradictions - The news of strict inspections on over - production in Shanxi coal mines reignited market sentiment, and the far - month contracts of coking coal hit the daily limit first. The strengthening of the coking coal 9 - 1 reverse spread reflects concerns about near - month delivery pressure and strong expectations for far - month valuations. The "anti - involution" policy may be hyped repeatedly, and the coking coal futures price is expected to be more volatile. The report is not pessimistic about the medium - and long - term trends of coal and coke. Attention should be paid to macro events at home and abroad. Near the 09 contract delivery, investors without spot handling ability are not recommended to participate in the delivery game, and the previously recommended coking coal 9 - 1 reverse spread can consider taking profits, and it is recommended to temporarily observe the 09 on - disk coking profit [4]. 4. Profit and Loss Analysis - **Positive Factors**: The expectation of "anti - involution" in coal mines remains, and the mine production increase space in the second half of the year may be limited. The downstream steel mills have good profits, providing a basis for raw material price increases. There is room for policy expectation game before the Fourth Plenary Session in October [5]. - **Negative Factors**: The import profit of overseas coal has recovered, and there will be pressure on subsequent arrivals. The customs clearance of Mongolian coal has resumed, with more than 1000 trucks per day currently. Off - balance - sheet inventory in the spot - futures market flows into the market, putting pressure on spot prices [5]. 5. Coal and Coke Futures and Spot Prices - **Futures Prices**: On August 5, 2025, compared with August 4, 2025, the basis of coking coal and coke futures had different degrees of change, and the on - disk coking profit decreased from - 18 to - 50 [6]. - **Spot Prices**: On August 5, 2025, compared with August 4, 2025, most coal and coke spot prices remained unchanged, and the immediate coking profit increased from - 60 to - 12 [7]. 6. Import Profits and Ratios - **Import Profits**: On August 5, 2025, compared with August 4, 2025, the import profit of Mongolian coal (long - term agreement) decreased by 51 to 234 yuan/ton, the import profit of Australian coal (Peak Downs) increased by 15 to - 241 yuan/ton, etc [8]. - **Ratios**: On August 5, 2025, compared with August 4, 2025, the ratio of coking coal to thermal coal increased from 2.39 to 2.4072 [8].

Investment Rating - The report maintains a "Buy" rating for several coal companies, including Jin控煤业, 华阳股份, and others, while providing cautious recommendations for some [4][10][14]. Core Insights - The coal industry is experiencing a supply contraction due to government inspections and policies aimed at reducing overproduction, particularly affecting thermal coal [2][8]. - Demand is expected to exceed expectations due to increased electricity consumption and infrastructure investments, with projected coal prices potentially reaching 750 RMB/ton in mid-August [3][9]. - The report highlights the self-regulating nature of supply and demand in the coal market, aided by government policies [2][8]. Summary by Sections Industry Overview - The National Energy Administration has initiated inspections of coal mines, particularly in eight key provinces, leading to a potential reduction of approximately 224 million tons in annual coal production due to overproduction [2][8]. - The report notes that the cost curve for coal production is steep, with high-cost regions like Xinjiang and Indonesia reducing output, contributing to a tighter supply [2][8]. Demand Dynamics - Electricity demand has shown signs of recovery, with national power generation growth reaching 7.89% year-on-year in early July, which is expected to drive coal demand higher [3][9]. - Non-electric chemical demand has also increased, with growth rates climbing from 10% to nearly 20% since early May, further supporting coal consumption [3][9]. Investment Recommendations - The report suggests focusing on companies with stable earnings and growth potential, such as Jin控煤业 and 华阳股份, as well as those with high spot market exposure like 潞安环能 [4][10][14]. - It also recommends monitoring companies that are expected to benefit from production recovery, such as 山煤国际, and industry leaders like 陕西煤业 and 中国神华 [4][10][14]. Market Performance - As of July 25, the coal sector has outperformed the broader market, with a weekly increase of 8.0% compared to 1.7% for the Shanghai Composite Index [15][17]. - Specific companies like 潞安环能 and 晋控煤业 have seen significant stock price increases, indicating strong market sentiment [21][22].

Core Viewpoint - The coal industry is experiencing a significant upward trend, with major coal companies' stock prices hitting the limit up, driven by anticipated regulatory changes and a potential shift in supply-demand dynamics [4][5][6]. Group 1: Market Performance - On July 22, the Shenwan Hongyuan Coal Index surged by 6.18%, with companies like Shanxi Coking Coal and Huahua Energy reaching their daily price limits [4]. - In the futures market, the main contracts for coking coal and coke also hit the limit up, with increases of 7.98% [4]. Group 2: Regulatory Developments - The National Energy Administration plans to conduct coal mine production inspections in key coal-producing provinces to ensure compliance with production capacities [5][6]. - The inspection will cover eight provinces, including Shanxi and Inner Mongolia, focusing on whether coal production exceeds announced capacities [5][6]. Group 3: Industry Trends - The coal industry is expected to undergo a "de-involution" process, with a focus on stabilizing supply and addressing the imbalance in supply-demand dynamics [6][7]. - The China Coal Transportation and Marketing Association has emphasized the need for coal companies to adhere to long-term contracts and improve production quality [6]. Group 4: Price Recovery and Demand - There are signs of a price recovery for coal and other resource products, with the China Electric Coal Procurement Price Index showing recent price increases [8][9]. - The market is experiencing a "high-temperature-driven demand release," leading to accelerated coal transportation and inventory reduction [8]. Group 5: Future Outlook - Analysts predict that the coal supply-demand structure may undergo a significant reversal, with demand rebounding while supply contracts, potentially leading to a balanced market [9]. - The focus on reducing excess capacity and improving production quality is expected to support coal prices in the near term [9].

Summary of Coal Industry Conference Call Industry Overview - The conference call focused on the coal industry, particularly discussing the implementation of "anti-involution" measures and supply-side reforms in response to declining coal prices and production challenges [1][2]. Key Points and Arguments - **Demand Improvement Expectations**: The government's "stability first" strategy aims to ensure energy supply security amidst declining coal prices, which have dropped by 20% for coking coal and reached a five-year low for thermal coal [9][10]. - **Production Control Measures**: The National Energy Administration (NEA) has implemented strict production capacity checks, with penalties for exceeding production limits set at 110% of approved capacity [4][11]. - **Regional Production Changes**: - Shaanxi's coal production is projected to decrease to 1.268 billion tons in 2024, down by approximately 80 million tons due to safety concerns and the exit of small mines [12]. - Shanxi plans to increase production to over 1.3 billion tons by 2025 through advanced capacity and technological upgrades [13]. - Inner Mongolia is expected to maintain the highest production at 1.297 billion tons in 2024, focusing on large-scale production and technological improvements [15]. - **Superproduction Issues**: Superproduction is prevalent among private enterprises, with regulatory challenges in monitoring compliance. The NEA emphasizes the need for on-site inspections and technical monitoring to address these issues [3][30]. Important but Overlooked Content - **Impact of Price Declines**: The decline in coal prices has led to significant discussions within the government regarding production limits to stabilize the market. The NEA's measures aim to prevent companies from increasing production to offset losses, which could lead to market oversupply [11][19]. - **Long-term Agreements**: Industry associations are advocating for long-term contracts to stabilize coal prices and prevent market volatility, with state-owned enterprises reportedly providing significant financial benefits through these agreements [21]. - **Financial Support for High-Quality Development**: The government is offering financial incentives, such as tax reductions, to support the development of safe, efficient, and green coal mining operations, particularly in western regions [22]. Conclusion - The coal industry is facing significant challenges due to price declines and regulatory pressures. The NEA's strict enforcement of production limits and the push for supply-side reforms are critical to maintaining market stability. The focus on technological upgrades and long-term contracts may provide pathways for recovery and growth in the sector [41].