Report Summary 1. Current Situation of Coal Production - In July 2025, the raw coal output of industrial enterprises above the designated size was 380 million tons, a year - on - year decrease of 3.8%, with a daily average output of 1.229 million tons. From January to July, the raw coal output was 2.78 billion tons, a year - on - year increase of 3.8% [1]. - The July output was 40 million tons lower than the previous month but was the second - highest in the same period in history. The cumulative output from January to July was 2.78 billion tons, the highest in history, 130 million tons higher than the same period in 2024 [2]. 2. Completion of Annual Output Target - To achieve the annual expected output of 4.8 billion tons set by the Energy Bureau, the average monthly output from August to December needs to reach 404 million tons. Compared with the average monthly output of 397 million tons from January to July 2025, theoretically, only a monthly increase of one million tons in the national total raw coal output is required [2]. 3. Reasons for Output Decline in July - The decline in July was a seasonal one, and heavy rains in the self - production areas and the "Three Western Regions" exacerbated the decline. Historically, from 2019 - 2024, the average monthly raw coal output in the second half of the year often exceeded that in the first half [2]. 4. Regional Over - production and Price Concerns - The regional over - production situation from January - June/July 2025 may be weaker than the same period. The continuous rise in coal prices may trigger concerns of relevant departments about price regulation [2].

Core Viewpoint - The report from Founder Securities indicates an expected increase in thermal coal demand for the year, with tightening supply likely to further boost coal prices. This creates potential benefits for elastic and undervalued sectors, while high dividend-paying stocks may see valuation improvements due to established policy support for coal prices [1]. Group 1: Policy Changes and Impacts - A new coal mine production verification policy has been introduced, strictly controlling overproduction behaviors. The policy mandates that annual coal output must not exceed announced capacity, and monthly output must not exceed 10% of announced capacity, with non-compliant mines facing shutdowns for rectification [2]. - The evolution of coal supply policies reflects changing market dynamics, with past policies addressing issues of overcapacity, compliance, and now overproduction. The latest policy aims to regulate production behavior directly, indicating a responsive adjustment to market conditions [3]. Group 2: Supply and Demand Analysis - The supply control measures are expected to stabilize coal prices, while demand will determine the potential for price increases. Historical data shows that past policies have led to significant price increases following their implementation, suggesting a similar outcome may occur if demand improves [4]. - In the thermal coal sector, domestic production is expected to increase as safety inspections ease, while imports are declining due to reduced profitability. The current high temperatures are driving up demand, with power plants consuming more coal, indicating a potential year-on-year increase in coal usage [5]. - For coking coal, domestic production remains high, but falling prices have led to reduced operating rates in some mines. The inventory dynamics are complex, with downstream demand influencing stock levels, and expectations of rising prices prompting early inventory accumulation [5].