China's coal port inventories have dropped to a three-year low, with prices at mining sites rebounding. Last week, the 5,500 kcal coal price at Qinhuangdao Port remained stable at RMB 770/ton, while production areas saw varying degrees of price adjustments. However, by the weekend, signs of price increases re-emerged, with some mining sites raising prices and Shenhua increasing its external procurement rates.
As the coal sector continues its "anti-overcapacity" measures and winter demand approaches, multiple institutions predict further improvements in coal company earnings. Recent sharp temperature drops in northern regions—such as -25°C in Mohe, Heilongjiang, and below -30°C in parts of Hulunbuir, Inner Mongolia—have prompted early heating in cities like Zhangjiakou and Daqing, marking the start of the seasonal coal consumption peak.
On the demand side, winter demand is rising, with steel mills and thermal power plants maintaining high consumption. Meanwhile, stricter safety inspections and "anti-overcapacity" policies may curb excessive production, reinforcing supply constraints and supporting price stability.
CITIC Securities forecasts coal prices will remain on an upward trend due to heating demand and intensified safety inspections. Inventory levels at sample power plants and ports are below historical averages, while coal imports from October to December are expected to stay low.
Production disruptions ahead of November safety checks have stabilized mining site prices, with cumulative effects from overcapacity audits impacting output. CHINA SHENHUA (01088) reported a 2.3% YoY increase in Q3 coal production, while YANKUANG ENERGY (01171) saw steady growth, with output up 4.92% YoY.
Q3 earnings for the coal sector improved sequentially, with revenue rising 1.5% QoQ and net profit up 14.1% QoQ. Changjiang Securities notes that October's coal sector outperformance was driven by fundamentals, policy support, and valuations. Despite higher P/E ratios, leading stocks offer dividend yields around 5%, appealing to insurers.
**Key Stocks:** - **CHINA SHENHUA (01088):** Holds 34.4B tons of coal reserves, with 3.27B tons produced in 2024. Expanding through acquisitions and new mines. - **CHINA COAL (01898):** Ranks third in reserves among listed firms, with 1.65B tons of operational capacity and new mines under development. - **YANKUANG ENERGY (01171):** Targets 155-160M tons of coal output in 2025, with new projects potentially adding 50M tons of capacity.