Core Viewpoint - The coal market is expected to see a recovery in performance in Q4 2025, driven by rising coal prices and a favorable supply-demand balance, with potential for a spring rally in Q1 2026 [1][7]. Price Trends - The average price of Qinhuangdao 5500 kcal thermal coal increased from 672 CNY/ton in Q3 2025 to 765 CNY/ton in Q4 2025, marking a 13.8% increase [3]. - In Q4 2025, the price fluctuated significantly, peaking at 834 CNY/ton before dropping to a low of 670 CNY/ton, yet still achieving a notable average increase [2]. Profitability Outlook - The profitability of coal companies is expected to improve, with thermal coal prices rising and coking coal prices also showing significant increases, particularly in long-term contracts [4]. - The average price for coking coal at Jing Tang Port rose to 1726 CNY/ton in Q4 2025, a 10.5% increase from Q3 [4]. Production Dynamics - The "overproduction check" policy has led to a mixed production performance among listed coal companies, with some reporting declines while others saw increases in output [5]. - Major coal producers like China Shenhua and China Coal Energy reported production decreases of 5.0% and 2.1% respectively, while Shaanxi Coal and Yanzhou Coal Energy reported increases of 3.6% and 1.0% [5]. Cost Management - Cost control remains a priority for coal companies, with strategies shifting from volume-driven to cost-focused approaches due to previous low coal prices [6]. - Despite a slight increase in costs expected in Q4 due to rising coal prices and year-end expense settlements, companies have managed to maintain a focus on cost efficiency [6]. Future Supply and Demand - The exit of certain coal supply capacities is anticipated to significantly improve the coal supply-demand balance, with a potential reduction of around 100 million tons if implemented nationwide [8]. - This policy aligns with previous market predictions and is expected to lead to a notable reduction in coal inventories, enhancing price elasticity in 2026 [8]. Investment Recommendations - Companies to watch include stable large-cap thermal coal firms such as China Shenhua, China Coal Energy, and Shaanxi Coal, as well as high-elasticity coal firms like Yanzhou Coal Energy and Jin Coal Industry [9].

Investment Rating - The investment rating for the coal mining industry is "Positive" (maintained) [4] Core Insights - The "overproduction check" effect continues to push up the coal price center, with demand fluctuations causing rapid price changes. From July to December 2025, domestic raw coal production fell for six consecutive months year-on-year, significantly improving the coal supply-demand balance. The price of Qinhuangdao 5500 kcal thermal coal rose from 621 RMB/ton on June 30, 2025, to 689 RMB/ton on January 20, 2026. In Q4 2025, despite significant monthly fluctuations in coal demand, the average price of Qinhuangdao 5500 kcal thermal coal increased from 672 RMB/ton in Q3 to 765 RMB/ton in Q4, a rise of 13.8% [4][5] - The profitability of the sector is expected to rebound, with coking coal enterprises likely to see significant improvements. The average price of Qinhuangdao 5500 kcal thermal coal in Q4 2025 is reported at 765 RMB/ton, up 13.8% quarter-on-quarter. The long-term contract price for thermal coal also increased, with the average price for Q4 reported at 685 RMB/ton, up 2.3% [4][5] - Production levels are stable, with fluctuations among listed coal companies. The "overproduction check" policy strictly requires that annual production does not exceed announced capacity, impacting production levels in the second half of 2025. Major listed coal companies showed mixed production results in Q4, with China Shenhua and China Coal Energy reporting decreases of 5.0% and 2.1%, respectively, while Shaanxi Coal and Yanzhou Coal reported increases of 3.6% and 1.0% [4][5] - Cost control remains a key focus, although rising coal prices and year-end cost settlements may increase costs. In H1 2025, coal prices declined, prompting companies to shift from volume-based strategies to cost control. As coal prices rebound, costs are expected to rise slightly in Q4 compared to Q3 [4][5] - The sector's performance is expected to continue its positive trend into Q4 2025, with anticipated earnings growth. The coal price has shown a quarterly step-down trend, but Q4 2025 is expected to see a rebound in performance due to rising coal prices [4][5] Summary by Sections - **Performance of the Sector**: The average price of Qinhuangdao 5500 kcal thermal coal increased significantly in Q4 2025, indicating a recovery in the sector's profitability [4][5] - **Production and Supply**: The "overproduction check" policy has led to a decrease in production, stabilizing the supply-demand balance [4][5] - **Cost Management**: Companies are focusing on cost control, with expectations of slight increases in costs due to rising coal prices [4][5] - **Future Outlook**: The coal sector is expected to see continued performance improvement into 2026, driven by supply-side policy changes and price rebounds [4][5]