Core Viewpoint - China Shenhua (601088.SH) reported a decline in coal production and sales for February 2026, indicating potential challenges in the coal industry [1] Group 1: Production Data - The coal production volume for February 2026 was 25.10 million tons, representing a year-on-year decrease of 7.0% [1] - The coal sales volume for February 2026 was 33.20 million tons, reflecting a year-on-year decline of 3.2% [1]

1. Report Industry Investment Rating - Not mentioned in the report 2. Core Viewpoints of the Report - The market sentiment is bullish due to the ongoing Iran - US conflict, high - fluctuating oil prices, and the spill - over of oil and gas and chemical market sentiment. Short - selling may not be appropriate until the Iran - US situation eases. It is advisable to look for short - term rebound opportunities in undervalued and high - elasticity varieties [19]. - Although the fundamental support for a significant short - term price rebound of coking coal is insufficient, attention should be paid to the possible short - term upward pulse of coking coal prices due to the continuous spill - over of market sentiment, especially when combined with sudden safety production upgrades. In the long - term, the coking coal price is expected to rise, with a higher probability during the safety production month and consumption peak season from June to October [19]. 3. Summary by Relevant Catalogs 3.1. Weekly Assessment and Strategy Recommendation - **Market Review** - Last week, the coking coal futures price fluctuated upwards, with a weekly increase of 60.5 yuan/ton or + 5.28%. The price was supported by the energy sentiment premium from high - level oil prices due to the Middle East situation. The price tested the support near 1100 yuan/ton and is approaching the long - term downward trend line. The support at 1100 yuan/ton and the resistance at 1250 yuan/ton should be monitored [14]. - The coke price also trended upwards, with a weekly increase of 47.5 yuan/ton or + 2.79%, mainly following the coking coal price. The support near 1600 - 1650 yuan/ton and the resistance near 1800 - 1850 yuan/ton should be watched [17]. - **Weekly Key Points Summary** - **Spot Price and Basis**: For coking coal, the prices of different types of coking coal showed different trends, with some rising and some falling. The basis of some coking coal varieties showed a premium, while others showed a discount. For coke, the prices of Rizhao Port and Luliang remained stable, and both showed a discount to the futures [18]. - **Position**: The position of the coking coal main contract is at a high level in the same period of the past six years, and the positions of the April and June contracts are significantly higher than normal, which may bring warehouse receipt pressure [18]. - **Domestic Production**: The daily average output of clean coal from 523 sample mines increased by 2.92 tons week - on - week, and the cumulative output decreased by 0.40% year - on - year. The daily average output of clean coal from 314 sample coal washing plants increased by 3.18 tons week - on - week, and the cumulative output increased by 9.40% year - on - year [18][74][76]. - **Overseas Imports**: The customs clearance volume of Mongolian coal at Ganqimaodu Port is at a high level in the same period. The import profit of Australian coking coal is - 265 yuan/ton, and the import window remains closed [18][79][82]. - **Demand**: The total daily average coke output of 247 steel enterprises and independent coking plants was basically flat, with a year - on - year decrease of 0.77%. The coking profit of independent coking plants was - 3 yuan/ton, a decrease of 20 yuan/ton week - on - week. The daily average hot metal output of 247 steel enterprises decreased by 6.39 tons week - on - week, and the steel mill profitability rate increased by 3.03 pct. The apparent consumption of five major steel products increased week - on - week but decreased year - on - year. The steel inventory increased week - on - week and year - on - year, but the inventory accumulation rate slowed down [18]. - **Supply - Demand Structure**: The estimated daily average supply of coking coal in the country is 154.41 tons, and the demand is 149.16 tons (coke production conversion) and 142.81 tons (hot metal conversion). The supply - demand of coking coal is marginally loose. The estimated daily average demand for coke from hot metal is 106.18 tons, and the supply - demand of coke is also marginally loose [19][110]. - **Inventory**: The total coking coal inventory increased by 13.24 tons week - on - week, with different changes in different sectors. The total coke inventory decreased by 0.31 tons week - on - week, also with different changes in different sectors [19][114]. 3.2. Futures and Spot Market - **Spot Price** - For coking coal, as of March 13, 2026, the prices of different coal types showed different trends, such as the price of low - sulfur main coking coal decreased by 20.1 yuan/ton, while the price of medium - sulfur main coking coal increased by 23 yuan/ton. For coke, the prices of Rizhao Port and Luliang remained stable [23][25][34]. - **Basis and Spread** - For coking coal, the basis of Shanxi low - sulfur main coking coal was 85 yuan/ton, and the basis of Jinquan Mongolian No. 5 clean coal was - 28 yuan/ton. The 5 - 9 spread of coking coal was - 99 yuan/ton, and it maintained a Contango structure. For coke, the basis of Rizhao Port quasi - first - grade wet - quenched coke was - 12 yuan/ton, and the basis of Luliang quasi - first - grade dry - quenched coke was - 27 yuan/ton. The 5 - 9 spread of coke was - 74.5 yuan/ton, also maintaining a Contango structure [42][45][48][51]. 3.3. Position and Variety Ratio - **Position** - As of March 13, 2026, the total unilateral position of coking coal was 599,300 lots, a decrease of 83,000 lots week - on - week, but still at a relatively high historical level. The unilateral position of coke was 42,100 lots, a decrease of 200 lots week - on - week. The position of the coking coal main contract is at a high level in the same period of the past six years, and the positions of the April and June contracts are significantly higher than normal [60][61]. - **Variety Ratio** - This week, JM/I increased by 0.01, HC/JM decreased by 0.09, indicating that coking coal was stronger than iron ore and finished products. Currently, JM/I is still at a low historical level, and the valuation of coking coal is relatively low compared to iron ore. J/I decreased by 0.04, HC/J decreased by 0.01, and JM/J increased by 0.02. Coke was slightly weaker than iron ore but slightly stronger than finished products. Currently, J/I is also at a low historical level, and the valuation of coke is relatively low compared to iron ore [66][69]. 3.4. Supply and Demand - **Domestic Coking Coal Production** - The daily average output of clean coal from 523 sample mines was 77.7 tons, an increase of 2.92 tons week - on - week. The daily average output of clean coal from 314 sample coal washing plants was 23.08 tons, an increase of 3.18 tons week - on - week [74][76]. - **Imported Coking Coal** - The customs clearance volume of Mongolian coal at Ganqimaodu Port is at a high level in the same period. The import profit of Australian coking coal is - 265 yuan/ton, and the import window remains closed. In 2025, the cumulative imports of Mongolian, Russian, Canadian, and Australian coking coal showed different trends, while the import of US coking coal was stagnant due to tariffs [79][82][85][89]. - **Coke Production** - The total daily average coke output of 247 steel enterprises and independent coking plants was 110.90 tons, basically flat week - on - week. The daily average coke output of 247 steel enterprises was 47 tons, unchanged week - on - week, and the daily average coke output of independent coking plants was 63.90 tons, a decrease of 0.04 tons week - on - week. The coking profit of independent coking plants was - 3 yuan/ton, a decrease of 20 yuan/ton week - on - week [92][95]. - **Downstream Steel Industry** - The daily average hot metal output of 247 steel enterprises was 221.2 tons, a decrease of 6.39 tons week - on - week. The steel mill profitability rate was 41.13%, an increase of 3.03 pct. The estimated profits of rebar and hot - rolled coil on the futures market were - 210 yuan/ton and - 162 yuan/ton respectively, and the profits continued to decline. The apparent consumption of five major steel products increased week - on - week but decreased year - on - year. The steel inventory increased week - on - week and year - on - year, but the inventory accumulation rate slowed down [98][104][108]. 3.5. Inventory - As of March 13, 2026, the total coking coal inventory increased by 13.24 tons week - on - week, with different changes in different sectors. The total coke inventory decreased by 0.31 tons week - on - week, also with different changes in different sectors [114].

Core Conclusions - The recent surge in strategic resource products is driven by concerns over AI substitution and escalating geopolitical conflicts, with frequent industry rotations observed this week, particularly in petrochemicals and non-ferrous metals [1] - The market for strategic resource products is supported not only by short-term shocks but also by long-term supply-demand changes that elevate price levels, indicating a potential continuation of the upward trend in the medium term [1][2] - Despite short-term market fluctuations, the overall bullish market trend for the year remains intact, with a focus on strategic resources under safety considerations and domestic demand-related assets, while AI technology remains a key theme for the medium term [1][3] Supply and Demand Dynamics - The current market for strategic resource products is influenced by supply constraints and rigid demand, which are driving price levels higher in the medium to long term [2][14] - Long-term capital expenditure is insufficient, resource nationalism is rising, and operational risks are increasing, all of which constrain the supply of strategic resource products [16] - The demand for strategic resources is being shaped by industrial trends and macro geopolitical changes, with AI and new energy sectors accelerating demand growth [17] Geopolitical Influences - The worsening geopolitical situation in the Middle East has catalyzed a rapid increase in oil prices, further stimulating the market for strategic resource products [13][14] - The ongoing geopolitical tensions are expected to suppress market risk appetite until the situation clarifies, although the underlying logic driving the stock market is anticipated to prevail in the medium term [25][26] Investment Focus - There is a strong emphasis on strategic resource products and a focus on domestic demand-related assets, with AI technology remaining a central theme for medium-term investments [3][27] - The report highlights the importance of safety considerations in the current complex external environment, with policies aimed at expanding domestic demand likely to benefit undervalued assets in real estate and consumer sectors [27] - The report suggests that the AI technology sector will continue to evolve, with a focus on applications and upstream energy and power sectors, as global energy supply tightens [27]

Core Viewpoint - Energy security is crucial for the overall economic and social development, with the "14th Five-Year Plan" outlining a target for China's comprehensive energy production capacity to reach 5.8 billion tons of standard coal by 2030 [1]. Group 1: Energy Security Strategy - The implementation of a new energy security strategy aims to accelerate the construction of a clean, low-carbon, safe, and efficient new energy system, contributing to the establishment of an energy powerhouse [2]. Group 2: Oil and Gas - The government will improve the pricing mechanism for refined oil and ensure a stable annual crude oil production of around 200 million tons [7]. - A collaborative approach between government and enterprises will enhance national oil reserves, with significant projects planned for oil reserve construction [7]. - The strategy includes a long-term oil and gas reserve and production increase plan, alongside reforms in natural gas pricing [7]. Group 3: Coal - Policies will be established to regulate coal prices and promote low-carbon transformation projects in coal-fired power plants [7]. - The goal is to replace 30 million tons of coal consumption annually and improve the coal reserve system [7]. Group 4: Natural Gas - Major infrastructure projects include the construction of pipelines for natural gas from Russia and domestic sources, as well as gas storage facilities [7]. - The development of gas bases in various regions is prioritized to enhance energy security [7]. Group 5: Renewable Energy - The construction of large-scale wind and solar power bases in desert areas is planned, with a target of adding around 100 million kilowatts of new installed capacity [10]. - Offshore wind power capacity is expected to exceed 100 million kilowatts, with a focus on orderly development in deep-sea areas [10]. - Nuclear power capacity is projected to reach approximately 110 million kilowatts, with ongoing efforts in comprehensive utilization and advanced technology development [10]. Group 6: Power System Optimization - The establishment of a unified national electricity market system is underway, aiming to enhance the resilience and efficiency of the power system [10]. - The capacity for west-to-east electricity transmission is targeted to exceed 420 million kilowatts, with improvements in inter-provincial power sharing [10].

Investment Rating - The report maintains an "Overweight" rating for the coal sector, emphasizing the value of coal as a bottom-line guarantee in the current market environment [5]. Core Insights - The report highlights the ongoing global demand for coal as a substitute energy source, driven by geopolitical tensions and supply chain disruptions, particularly in the Middle East [8]. - It suggests that despite a seasonal decline in domestic coal consumption, international coal demand is expected to rise significantly due to the ongoing conflicts affecting oil and gas supplies [8]. - The report identifies several key investment opportunities within the coal sector, focusing on companies with strong dividend yields and low valuations, as well as those with significant profit elasticity [8]. Summary by Sections 1. Industry Overview - The coal industry comprises 37 listed companies with a total market capitalization of approximately 2,369.02 billion yuan [2]. - The report notes a mixed performance in coal prices, with international prices rising due to geopolitical factors while domestic prices are under pressure from seasonal demand fluctuations [8]. 2. Price Tracking - As of March 13, 2026, the average daily production of thermal coal from 462 sample mines was 5.465 million tons, showing a week-on-week increase of 1.98% but a year-on-year decrease of 5.69% [8]. - The report indicates that the price of thermal coal at the Qinhuangdao port was 734 yuan per ton, down 15 yuan from the previous week but up 48 yuan year-on-year [8]. 3. Inventory Tracking - Port inventories have been increasing due to improved supply from production areas, with Qinhuangdao port coal inventory reaching 6.6 million tons as of March 13, 2026, a week-on-week increase of 16.4% [8]. 4. Downstream Performance - The report notes a decline in daily coal consumption across 25 provinces, with a total of 4.999 million tons, down 12.34% week-on-week and 5.27% year-on-year [8]. - It highlights the performance of downstream sectors such as electricity generation, steel production, and cement, which are critical for coal demand [8]. 5. Company Performance - The report tracks the operational performance of key coal companies, emphasizing their dividend policies and growth prospects, with several companies expected to enhance their production capacities in the coming years [13][14].

Market Overview - The Hang Seng Index closed at 25,717, down 0.70% for the day and up 0.34% year-to-date[3] - The S&P 500 index closed at 6,776, down 1.52% for the day and down 2.53% year-to-date[3] - Brent crude oil prices surged to nearly $100 per barrel, raising inflation concerns[9] Sector Performance - The coal sector showed strength, with Feishang Anthracite rising over 18% and Nanshan Resources up over 12% due to rising oil and gas prices[9] - Renewable energy stocks also gained, with Datang New Energy up over 8% and Goldwind Technology up over 7% following the UK’s announcement to eliminate import tariffs on wind power components[9] - AI application stocks faced declines, with Zhizhu falling nearly 9% and MINIMAX down 5% due to regulatory concerns[9] Geopolitical Impact - Iran's new Supreme Leader, Mujtaba Khamenei, signaled a continuation of aggressive strategies, including the potential blockade of the Strait of Hormuz, impacting oil supply expectations[9] - The market's expectation for a quick resolution to Middle Eastern conflicts diminished, leading to widespread sell-offs in U.S. markets[9] Economic Indicators - The Federal Reserve is expected to maintain interest rates during the upcoming meeting, despite rising inflation pressures from geopolitical tensions[9] - The U.S. trade deficit narrowed more than expected in January, indicating some resilience in the economy[12]

Investment Rating - The coal industry is rated as "stronger than the market" [6] Core Views - Geopolitical events are increasing countries' willingness to control energy and resources, leading to a trend of rising prices for resources, including coal [5] - The domestic focus is on reversing the "involution" to achieve the fundamental goal of reversing the Producer Price Index (PPI), with coal prices expected to fluctuate upward amid uncertainty in demand [5] - The coal industry is in a transformative era, with limited supply elasticity due to strict capacity controls and increasing extraction difficulties, indicating that coal will remain a key energy source in the short term [5] Summary by Sections Coal Market Overview - As of March 13, the Qinhuangdao 5500K thermal coal price is 729 CNY/ton, down 14 CNY/ton week-on-week, with a year-on-year increase of 47 CNY/ton [3][29] - The average daily output of 462 sample coal mines is 5.464 million tons, up 106,000 tons week-on-week, but down 570,000 tons year-on-year [3][40] - The inventory index for thermal coal increased slightly to 181.4 as of March 9, indicating a rise in coal stock levels [3][52] Coking Coal - The price of coking coal at the Jing Tang Port is 1570 CNY/ton, down 10 CNY/ton week-on-week, with a year-on-year increase of 190 CNY/ton [4][76] - The average daily output of 523 sample coking coal mines is 777,000 tons, up 29,000 tons week-on-week, with a year-on-year increase of 5.1% [4][75] Investment Opportunities - Recommended stocks include China Shenhua, China Coal Energy, and Shaanxi Coal and Chemical Industry for their strong resource endowments and stable performance [6] - Stocks with production growth potential benefiting from the coal price cycle include Yanzhou Coal Mining, Huayang Co., and Gansu Energy [6] - Companies with global resource scarcity attributes such as Huaibei Mining and Shanxi Coking Coal are also recommended [6]

Core Insights - The report indicates that the geopolitical situation in the Middle East has reached a dramatic turning point, with oil prices fluctuating at high levels, leading to continued volatility in global financial markets. It is anticipated that the current geopolitical conflict has peaked, but disturbances are not entirely over. The report suggests that A and H shares may experience range-bound fluctuations and narrow oscillations in the near future, with a positive outlook for a "systematic slow bull" market in the longer term [1][3][47]. Market Overview - The major indices have shown mixed performance, with the Shanghai Composite Index and the Shanghai 50 Index declining by 0.70% and 1.20% respectively, while the CSI 300 Index saw a slight increase of 0.19% due to support from new energy and optical module leaders. Growth indices such as the CSI 500 and CSI 1000 experienced declines of 1.44% and 0.42% respectively, while the ChiNext Index rose by 2.51% supported by heavyweight stocks [9][44]. - The energy sector has shown resilience, with the report highlighting that the "new and old energy" sectors performed well, with electricity equipment rising by 4.55%, coal increasing by 5.03%, and public utilities up by 3.07%. Conversely, sectors like military, non-ferrous metals, media, and machinery saw declines due to ongoing geopolitical tensions [12][46]. Investment Strategy - The report recommends maintaining strategic discipline in timing investments, avoiding excessive pessimism or blind optimism until the market stabilizes. It emphasizes optimizing industry structure to achieve a balanced offensive and defensive strategy. The "new and old energy" combination is suggested as a key focus, with new energy (electricity) and old energy (power) serving as the offensive spearhead. Additionally, it is advised to hold relatively low-positioned securities and to enhance defensive positions by adding agriculture and transportation sectors to mitigate risks [1][48][47]. - The report also points out that certain state-owned enterprises with low positions and dividend attributes could act as stabilizers during escalated geopolitical conflicts, while stocks related to infrastructure, oil transportation, shipping, and ports may directly benefit from the situation [1][48].

Market Performance - US stock markets continued to decline, with the Dow Jones Industrial Average down 0.26% to 46,558.47 points, the S&P 500 down 0.61% to 6,632.19 points, and the Nasdaq down 0.93% to 22,105.36 points, marking three consecutive days of losses for the Dow and S&P 500 [4][6] - The Nasdaq index accumulated a decline of 1.26% for the week, while the Dow and S&P 500 fell by 1.99% and 1.6%, respectively [4][6] Sector Performance - Major technology stocks experienced declines, with the "Big Seven" tech companies index down 1.59%. Notable declines included Meta down 3.84%, Apple down 2.31%, and Nvidia and Microsoft down over 1.5% [6][7] - Coal and non-ferrous metal stocks mostly fell, with Hallador Energy down over 11% and Southern Copper down 5.4% [8] Chinese Stocks - Chinese stocks saw a general increase, with the Nasdaq China Golden Dragon Index rising 0.76%. Key Chinese stocks such as JD.com, NetEase, and Alibaba all posted gains [8][9] Oil Prices - International oil prices surged significantly, with Brent crude futures closing above $100 per barrel for the second consecutive trading day, reaching a three-year high of $103.89 per barrel [11][15] - WTI crude oil also rose for three consecutive days, currently priced at $99.31 per barrel [13] Geopolitical Events - President Trump announced airstrikes on Iran's oil export hub, Khark Island, claiming to have destroyed all military targets while sparing oil infrastructure. This action is part of escalating tensions in the Middle East [21][22] - The US is increasing military presence in the Middle East, deploying additional Marine Corps and naval vessels in response to ongoing tensions with Iran [26] Currency and Precious Metals - The US dollar index reached a new high for the year, surpassing 100, with a 0.75% increase. The dollar strengthened against the yen, reaching its strongest level since July 2024 [16][18] - Precious metals prices fell, with spot gold down to $5,018 per ounce and silver down to $80.584 per ounce [19][20]

Group 1 - The ongoing Middle East turmoil exceeds market expectations, leading to increased global risk aversion and a rise in risk assessment. The implied geopolitical risk premium for commodities has not yet reached historical extremes, indicating potential for further price increases in commodities if Middle Eastern disturbances persist beyond expectations, which would boost price expectations in related cyclical sectors such as petrochemicals, coal, natural gas, electricity, and agriculture [5][8][19] - As geopolitical tensions rise, the geopolitical risk index is also increasing. This escalation in geopolitical risk will have two main impacts: an upward shift in inflation expectations and a downward shift in risk appetite, leading to negative impacts on global equity markets [5][12] - The direct impact of geopolitical disturbances is seen in commodities. Statistical results show that since the changes in the Middle East situation in March, commodities with a higher correlation to geopolitical risks have experienced significantly greater price increases [5][19] Group 2 - The implied geopolitical risk premium index for commodities is currently above historical averages but remains significantly below the peak observed during the 2022 Russia-Ukraine conflict. This suggests that the market has not overly priced in potential future conflicts, and if the Middle East turmoil continues to exceed expectations, commodity prices still have room for growth [5][21][24] - In the medium term, there is no need for excessive concern as the negative impact of rising geopolitical risks on stock markets in various countries is increasing, while the impact on the Chinese stock market is actually decreasing. Statistical analysis shows that the correlation between rising geopolitical risks and volatility in US stock indices is strengthening, while the impact on domestic stock index volatility is diminishing [5][12][19] Group 3 - The methodology for calculating the implied geopolitical risk premium for commodities involves four steps: 1. Rolling correlation statistics of commodity price changes against the geopolitical risk index over 12 months to identify high and low correlation commodities [20] 2. Averaging the prices of high and low correlation commodities to create two price indices, with the ratio of these indices serving as the first factor of the implied geopolitical risk premium [20] 3. Calculating the price increase diffusion index, which measures the proportion of commodities that have increased in price each month, serving as the second factor [20] 4. A weighted average of the two factors to derive the implied geopolitical risk premium index, which historically correlates with geopolitical risks [21]