Investment Rating - The report maintains a "Positive" investment rating for the coal industry [9] Core Insights - The resilience of demand must be paired with the rigidity of supply to support a stable coal price cycle. Developed countries have already entered a downward supply channel, while countries with current supply growth may face similar risks in the future. The combination of supply rigidity and demand resilience is expected to lead to a stable global coal supply-demand pattern [2][7] Summary by Sections Introduction - The report emphasizes that the stability of coal prices requires a logical closure formed by supply rigidity. It explores the long-term perspectives on demand, supply, and costs, aiming to clarify the medium to long-term price center of coal [5][17] Experience from Developed Countries - Coal supply changes are primarily influenced by resource endowment and demand variations. Countries with shrinking coal supply account for about 19% of global supply, including the US, Europe, Japan, South Korea, Australia, and South Africa. Historical trends indicate that long-term coal supply contraction is typically due to resource depletion, long transportation distances, and stringent environmental policies [5][35] Outlook for Growing Countries - China faces supply growth constraints due to resource depletion in Shanxi and central eastern regions. Indonesia and Russia are experiencing rising costs. Countries with ongoing coal supply growth account for approximately 77% of global supply, with China alone accounting for 50%. Future projections indicate potential supply shortages in China and declining production in Indonesia due to increased export costs [6][7] Investment Recommendations - The report suggests that the combination of supply rigidity and demand resilience will prolong the duration of coal price flattening. It recommends several companies for investment based on their performance and market conditions, including Yanzhou Coal Mining Company, Shanxi Coking Coal Group, and China Shenhua Energy [7][9]

Group 1: Core Insights - The coal prices have reached a bottom in the first half of the year, with potential for a rebound in the second half as supply-demand dynamics improve, indicating resilience in coal demand in the medium term [1] - In Q1 2025, despite significant performance pressures, the coal sector remains strong with low debt-to-asset ratios (44.7%), high net profit margins (12.7%), and relatively high return on equity (ROE) [1] - The current low interest rate environment enhances the investment appeal of high-dividend leading stocks in the coal sector [1] Group 2: Supply Dynamics - From January to May, domestic coal production increased by approximately 130 million tons year-on-year, while imports decreased by about 16 million tons, indicating an overall increase in supply [2] - The domestic raw coal production for the same period reached 1.99 billion tons, reflecting a year-on-year increase of 6%, with expectations for a narrowing growth rate in the second half of the year [2] - Coal imports are projected to remain low, with an expected year-on-year decrease of 8 million tons (-15%) for the entire year, primarily due to reduced imports from Indonesia [2] Group 3: Regional Insights - The transportation demand for coal from Xinjiang has seen a temporary decline due to falling coal prices, despite efforts to lower railway freight rates [3] - As of June 6, the railway transportation volume of Xinjiang coal increased by only 6.8% year-on-year, with limited price advantages in certain regions [3] - Xinjiang is accelerating investments in coal chemical and coal power projects, indicating a future increase in local coal consumption [3] Group 4: Price and Production Trends - Historical data suggests that when coal prices drop below 600 RMB/ton, production cuts begin to occur, with previous years showing significant reductions in coal output [4] - Current coal companies maintain reasonable profitability and operational quality, making spontaneous production cuts less likely, although a slight reduction may occur if prices fall below cost lines [4] Group 5: Demand Outlook - National coal consumption from January to May reached 2.05 billion tons, showing a slight year-on-year increase of 0.5%, with expectations for improved demand in the second half of the year [5] - The thermal power sector is under pressure due to slower electricity demand growth and competition from renewable energy, but a rebound is anticipated as the peak season approaches [5] - Non-electric demand, particularly for chemical coal, remains strong, with significant year-on-year growth in coal-to-PVC, coal-to-ethylene glycol, and coal-to-methanol production [5]