Core Viewpoint - The coal mining industry is experiencing a shift aimed at breaking the "deflation spiral," with a focus on the long-term coal price benchmark of 675 RMB/ton as a critical point [1][5] Group 1: Policy and Regulatory Developments - The National Energy Administration has initiated a verification of coal mine production in eight key provinces to ensure stable coal supply [2] - The verification will assess whether coal production in 2024 exceeds announced capacity and if production plans for 2025 are reasonable [2] - A timeline has been set for the verification process, with reports due by August 15, and the National Energy Administration will conduct random checks [2] Group 2: Inventory and Demand-Supply Dynamics - Total coal inventory is projected to increase by approximately 28.34 million tons in 2024, excluding unreported inventories [3] - A different calculation method indicates a total inventory increase of about 92.69 million tons, reflecting a more comprehensive view of supply and demand [3] - By June 2025, domestic coal inventory is expected to decrease compared to the same period in 2024, with prices having rebounded after hitting a low in mid-June [3] Group 3: Production Capacity and Market Adjustments - There is limited room for overproduction at the national level, with a target of approximately 4.8 billion tons of coal production for 2025 [4] - Some regions, particularly Xinjiang and Shaanxi, may face overproduction issues due to high capacity utilization [4] - The policy toolbox is available for temporary capacity adjustments to ensure supply, similar to measures taken in late 2021 [4] Group 4: Price Projections - The coal industry is expected to see a price range of 700-750 RMB/ton for power coal by the end of the year, influenced by policy measures [1][5] - The long-term coal price benchmark of 675 RMB/ton remains a significant focus for market participants [5]

Investment Rating - The industry rating is "Outperform the Market" (maintained rating) [5] Core Viewpoints - The target price range for thermal coal at ports is expected to reach 700-750 RMB/ton by the end of the year [4][24] - The report emphasizes the need to break the coal-electricity deflation spiral, with a focus on controlling production rates to avoid excessive competition [13][16][25] - The coal supply situation is being closely monitored, with a national coal production target of approximately 4.8 billion tons for 2025 [4][21] Summary by Sections Coal Mine Overproduction Inspection - The National Energy Administration has initiated inspections of coal production in eight key provinces to ensure that production does not exceed announced capacities [2][11] - The inspections will assess whether the coal mines' production plans for 2025 exceed the announced capacities by more than 10% [11][12] Inventory Changes - In 2024, the inventory of thermal coal is projected to increase by approximately 28.34 million tons based on major port, pit, and power plant inventories [3][22] - An alternative calculation method suggests that the total inventory increase could be around 92.69 million tons, indicating a significant supply-demand imbalance [3][21] Policy Toolbox and Adjustability - The report discusses the potential for policy adjustments to manage coal production and supply, highlighting the importance of maintaining a balance between production and market prices [4][25] - The report notes that while there may not be nationwide overproduction, certain regions may still face issues due to high capacity utilization [21][23] Market Dynamics - The report indicates that the market has begun to self-correct, with thermal coal prices rebounding after hitting a low in mid-June 2025 [21] - The coal industry's current dynamics suggest that controlling production rates is crucial to avoid a deflationary spiral in coal prices [16][25]