Subject Company: Global Coal Industry (primarily thermal coal, supplemented by coking coal), with a focus on the Chinese market
Date: July 19, 2026
Stance: Cautious Bull – Supply constraints are stronger than demand contraction, supporting a floor for coal prices, but high inventories and Indonesia’s flexible capacity limit upside potential
Coal is one of the world’s most important fossil fuels, classified into thermal coal (used for power generation, heating, industrial boilers) and coking coal (used in blast furnace steelmaking). Collectively, they account for approximately 26% of global primary energy consumption (IEA, 2025).
Simplified Industry Chain: Mine extraction → Washing and processing → Transportation (railway/port/shipping) → End users (power plants/steel mills/cement plants/chemical plants).
This report covers the entire global coal value chain, using China’s pricing benchmarks (Qinhuangdao Q5500 thermal coal, Shanxi primary coking coal) and Asia-Pacific seaborne benchmarks (Newcastle 6,000 kcal FOB, Australian premium hard coking coal FOB) as price anchors, analyzing the cycle and direction of China’s coal industry.
Global coal consumption reached 8.845 billion tonnes in 2025, up +0.5% YoY, another record high (IEA Coal 2025). However, this is likely the last round of new highs – the IEA predicts global demand will decline by 265 million tonnes (-3.0%) from 2025 to 2030, with a CAGR of approximately -0.5%.
End-Use Breakdown (2025, IEA basis):
| Use | Share | Trend |
|---|---|---|
| Power/Power Generation | 67.5% | Global coal power hit a new high in 2025, but China’s thermal power turned negative for the first time on an annual basis |
| Steel/Metallurgy | 12.7% | Global crude steel output declined, China’s steel -1.7% |
| Building Materials/Cement | ~8% | China’s cement output -9.5%, significantly dragged by real estate |
| Chemicals/Coal-to-Chemicals | ~8% | Only non-power coal use with positive growth, China’s coal-to-chemicals +17.4% |
| Other Industries | ~4% | Indonesia’s nickel smelting coal use drove +8% growth |
Source: IEA Coal 2025; China Coal Industry Association
Key Conclusion: India+Southeast Asia contribute +352 Mt growth, but this is offset by a combined decline of -617 Mt from China (-179 Mt) + EU (-153 Mt) + United States (-106 Mt) + Others (-179 Mt). Growth from emerging markets cannot reverse the overall downtrend in global volumes.
China accounts for 56% of global coal consumption (approximately 4.953 billion tonnes in 2025), making it the decisive variable for global coal demand. Three signals indicate China’s demand has already passed the inflection point:
Thermal power generation turned negative: In 2025, China’s thermal power generation fell -1.0% YoY (6,327.2 TWh), the first annual decline since 2015 (National Bureau of Statistics 2025 Statistical Communique). This is not just a weather factor – solar capacity surged +35.4% to 1,200 GW and wind capacity +22.9% to 640 GW in 2025, with new energy additions covering all incremental electricity demand.
Steel/cement continued to decline: China’s crude steel output fell -4% YoY and cement output -7% in 2025, with the real estate downturn imposing a structural drag on non-power coal use.
Coal-to-chemicals is the only hedge: In 2025, China’s coal-to-chemicals coal consumption increased +17.4% YoY (Cinda Securities). Total investment in under-construction coal-to-chemical projects in Xinjiang exceeds 700 billion RMB. However, the volume of coal used for chemicals (about 420 Mt/year) is far smaller than power generation coal (about 3.1 billion tonnes/year), and the incremental growth cannot offset the declines in power and steel.
Peak Timing Judgment: China’s coal consumption most likely peaked in 2024 (4.953 billion tonnes), with 2025–2028 serving as a peak plateau confirmation period (China Coal Industry Association forecast). However, we highlight upside risks: if Xinjiang coal-to-chemical projects come online faster than expected, or if new energy curtailment bottlenecks cause thermal coal utilization hours to recover, the peak could be delayed to 2028–2030.
But India+ASEAN increments (+352 Mt) are far smaller than China’s incremental growth over the past 20 years (about 3 billion tonnes) and cannot replicate the "China demand super cycle".
Global coal production in 2025 was approximately 9.111 billion tonnes (IEA basis). The top 6 countries account for 87% of global output: China 52%, India 12%, Indonesia 8.5%, Australia 4.9%, Russia 4.7%, United States 5.2%.
China: Raw coal production in 2025 was 4.832 billion tonnes (+1.2% YoY), Shanxi 1.305 billion tonnes / Inner Mongolia 1.286 billion tonnes / Shaanxi 805 million tonnes / Xinjiang 553 million tonnes. Imports 490 million tonnes (-9.6% YoY).
China’s production is highly concentrated in four provinces (Shanxi, Shaanxi, Inner Mongolia, Xinjiang), accounting for 81.7% of national output, with a continuing shift westward – the western region’s share rose to 63.8% in 2025 (+4 ppts from 2020).
Current Newcastle FOB $129.51 (July 17, 2026) sits at the 75th-85th percentile of the cost curve – existing capacity is generally profitable, but it is only about 30-45% above the $85-100/t level needed to incentivize new mine investment, making new mine investment only moderately attractive.
China’s domestic thermal coal all-in cost is approximately RMB 300-500/t ($41-69/t), far below the seaborne market. The current Qinhuangdao price of RMB 804/t provides a profit margin of about RMB 300-500/t for domestic mines.
Following the gas explosion at the Liushuyu Coal Mine in Qinyuan, Shanxi (82 deaths) on May 22, 2026, the central government dispatched 24 inspection teams covering all 31 provinces. In June, China’s raw coal output fell -9.7% YoY to 381 million tonnes, with daily output of 12.7 million tonnes hitting the lowest level in nearly a year (Mysteel, July 2026). As of July 1, 70 mines remained shut (capacity 93.7 Mt/year), with slow resumption progress.
Coupled with the normalization of over-capacity checks launched in July 2025 (National Energy Administration Comprehensive Coal [2025] No. 108), which explicitly states that "monthly output shall not exceed 10% of declared capacity," China’s effective capacity ceiling is approximately 4.95 billion tonnes/year (4.5 billion tonnes of approved capacity × 1.1).
Indonesia’s 2026 production target has been revised down from the 2025 actual of 817 Mt to an initial quota of approximately 600 Mt (but the RKAB revision window opened in July 2026, with Energy Minister Bahlil stating a "controlled relaxation". Actual output in 1H26 reached 367 Mt, suggesting the full year could reach 700-733 Mt, not a rigid 600 Mt ceiling).
More critically, the tightening is structural: The DMO (Domestic Market Obligation) ratio is proposed to increase from 25% to over 30%, with exports to be centrally controlled by PT DSI (state-owned enterprise) from 2027 onwards, while the DMO price cap remains at $70/t. Even if output remains above 700 Mt, exportable volumes will be reduced by the higher DMO.
Key Judgment: Supply faces a triple constraint of "China safety supervision + Indonesia DMO + Australia approvals", but these constraints are not rigid – China’s safety supervision is an adjustable policy tool, and Indonesia’s production quota has considerable flexibility (July RKAB revision). Supply contraction is more of a "policy intention" than a "physical bottleneck," which reduces supply-side certainty.
| Year | Global Demand (Mt) | Global Supply (Mt) | Surplus/Shortage (Mt) | Trend |
|---|---|---|---|---|
| 2024 | 8,805 | 9,150 | +345 | Historical surplus |
| 2025E | 8,845 | 9,111 | +266 | Surplus narrowing |
| 2026E | 8,800 | 9,000 | +200 | Further narrowing |
| 2027E | 8,750 | 8,900 | +150 | Further narrowing |
Source: IEA Coal 2025/Mid-Year Update; supply minus demand gaps calculated to balance
The global coal market remains in supply surplus from 2024 to 2027, but the surplus narrows from 345 Mt to 150 Mt, a favorable direction for prices. Price upside requires the surplus to narrow close to zero (i.e., supply shock exceeding expectations), not merely a reduction in the extent of oversupply.
Key Contradiction: Spot near-term backwardation (Newcastle Q3'26 ~$129-133 vs CAL-27 ~$124.85, globalCOAL) points to tight spot supply, but high port/power plant inventories point to ample supply. The reasonable explanation for this contradiction is: short-end backwardation reflects structural supply shocks (Indonesia export disruption + Shanxi accident), but inventories are the result of accumulated stockpiles that have not yet been absorbed. High inventories are the main force suppressing coal price upside.
Current Prices (July 17, 2026, Mysteel/CCTD):
Prices are in a medium-to-low historical range – far below the extreme peaks of 2021-2022 and also below the 2024 average, but have recovered from the bottom of 2025.
Past three complete coal price cycles (anchored by Qinhuangdao Q5500):
| Cycle | Time | Low→High | Amplitude | Trigger |
|---|---|---|---|---|
| ① 2015-2020 Bear Market | ~5 years | 360→700 RMB | ~90% | Supply-side reform + weak demand |
| ② 2020-2023 Super Bull | ~3 years | 460→2,600 RMB | ~465% | Post-pandemic recovery + Russia-Ukraine conflict + global energy crisis |
| ③ 2023-2026 Correction | 3 years+ | 720→850→702 RMB | ~45% | Supply-demand rebalancing + new energy substitution + safety regulation disruption |
Currently in the middle-to-late stage of the ③ correction cycle – prices fell from an average of RMB 850/t in 2024 to RMB 702/t in 2025, then rebounded to the RMB 720-870/t range in 2026 due to supply shocks. The core characteristic is a range-bound oscillation pattern with "cost support below and inventory cap above", rather than a unilateral trend.
Pricing Framework: Incentive price floor (seaborne $85-100/t + Chinese pithead RMB 300-500/t) + supply-demand balance direction (global surplus narrowing from +345 Mt to +150 Mt) + inventory position (China power plant 34-day historical high curbing spot premiums).
| Period | Qinhuangdao Q5500 (RMB/t) | Newcastle FOB ($/t) | Core Logic |
|---|---|---|---|
| 2026Q3 | 760-850 | 115-135 | Peak summer demand + safety disruption vs high inventory + ample hydro |
| 2026Q4 | 720-820 | 105-130 | Winter heating coal preparation vs high inventory, weak peak season |
| 2027Q1 | 700-800 | 100-125 | Seasonal demand decline around Chinese New Year |
| 2027Q2 | 680-780 | 95-120 | Heating end + new energy ramping up = traditional slack season pressure |
Anchor points: Incentive price $85-100/t (seaborne) and China pithead RMB 300-500/t provide floor support; China power plant high inventory (34 days) limits upside. If Indonesia export policy tightens more than expected or China’s safety supervision becomes long-term, upside risks are significant.
Competitive landscape judgment: Already entered the late stage of consolidation where "the strong get stronger". Competition dimensions are shifting from scale expansion to cost competition + value chain extension.
| Value Chain Segment | Profit Scale (2025) | Trend | Core Driver |
|---|---|---|---|
| Coal Mining (Mine) | Approximately RMB 352 billion | ↓ (-41.8% YoY) | Falling coal price midpoint |
| Thermal Power (Downstream) | Approximately RMB 872.1 billion | ↑ (+13.9% YoY) | Lower coal prices + stable electricity prices |
| Coal Transportation | Not available | → Stable | Rigid transportation demand |
| Coal-to-Chemicals | Not available | ↑ Expanding | Xinjiang mega-projects + policy support |
Source: National Bureau of Statistics / CCTD China Coal Market Network
Profit Migration Direction: Over the next 2-3 years, profits will shift from mining to power/coal-to-chemicals. The long-term contract mechanism (covering approximately 80% of thermal coal trading) is the core regulator of profit distribution – protecting downstream when coal prices are high, and protecting upstream when coal prices are low.
| Company | Production (Bt) | Profit per Tonne | ROE | Long-term Contract Share | Dividend Yield | One-line Summary |
|---|---|---|---|---|---|---|
| China Shenhua Energy | 0.332 | ~170 RMB | 12.6% | ~85% | 4.4% | Integrated leader, bond-like defense |
| China Coal Energy | 0.135 | ~130 RMB | 11.5% | ~80% | ~4% | Pioneer in coal-to-chemicals transformation |
| Shaanxi Coal Industry | ~0.150 | 338 RMB | ~14% | ~60% | ~5% | Lowest cost + best coal quality |
| Yankuang Energy | ~0.130 | ~160 RMB | 9.2% | ~25% | ~3% | High-beta cyclical name |
Source: Each company’s 2025 annual report; ROE based on 2025 attributable net profit
Return Quality Judgment – Medium: Companies with high long-term contract shares (Shenhua/China Coal) earn real cash – high operating cash flow, low leverage, sustainable ROIC ~12-14%, with bond-like characteristics. However, industry-wide profits fell -41.8% YoY in 2025, the loss-making ratio widened to 42%, and tail-end coal companies are already widely loss-making. "High dividends" exist only among the top 3-4 companies.
Industry Valuation Position: Shenwan Coal Index PE(TTM) 19.81x (75th percentile over 12 years), PB 1.41x (60th percentile). The high PE percentile mainly reflects a sharp decline in 2025 earnings (denominator effect); the 60th percentile PB better reflects true valuation – the industry is not extremely cheap but not expensive either. In comparison, China Shenhua Energy trades at PE 18.7x (98.44% historical percentile over 5 years), indicating the market has fully priced in "certainty".
Supply Side Tightening (Bullish for coal prices):
Demand Side Suppression (Bearish for coal prices):
Long-term Contract Mechanism Fine-tuning: The 2026 long-term contract signing ratio reduced from 80% to 75% (based on own resource volume), with the introduction of a "base price + floating price" monthly adjustment at the mine site – long-term contracts are also being fine-tuned toward market orientation, not purely rigid support.
Indonesia’s policy creates a situation of "volume may not be small, but export share declines" – mildly bullish for seaborne coal prices but not disruptive.
In 1H26, Mongolia’s coking coal exports to China surged 56.34% to 48.91 Mt, with June alone at 10.31 Mt (+69%). Since February 2026, zero tariffs apply, and Ganqimaodu border inventories stand at a high 4.44 Mt. A cross-border railway is expected to open in 2027 (design capacity 30 Mt/year), further reducing logistics costs by 40%.
This means coking coal faces structural oversupply pressure and will continue to underperform thermal coal.
New national standard for methane emissions (GB 21522-2024) implemented in April 2025; seven ministries advancing green mine construction; ESG fund allocation to the coal sector continues to decline. Direction is clearly bearish, but short-term marginal impact is limited.
Net Policy Direction Judgment: Over the next 12-24 months, slightly bullish (supply-side tightening effect > demand-side carbon constraint effect), but policy tools themselves are adjustable, not rigidly bullish.
| Bull | Bear |
|---|---|
| China’s safety supervision + Indonesia’s DMO tightening form a "dual supply contraction," narrowing global oversupply (345→150Mt), lifting the coal price center | Indonesian output is elastically adjusted (367Mt already produced in H1, RKAB revision in July), and China’s safety supervision is an adjustable policy tool. Supply tightening is an "intent" rather than a "bottleneck"; oversupply may still be 250-350Mt |
Tracking indicators: ① Indonesia monthly production data (published by ESDM); ② China monthly raw coal output (National Bureau of Statistics); ③ Indonesia RKAB revision results
| Bull | Bear |
|---|---|
| China’s thermal power sees first negative growth in 2025 (-1.0%), renewable energy capacity surges, steel/cement structurally decline | The 2025 thermal power decline is partly due to an abnormally wet year (hydro power surge), coal chemical output +17.4% continues growing, Xinjiang coal chemical investments exceed RMB 700 billion. The peak may be delayed to 2028-2030 |
Tracking indicators: ① China monthly thermal power generation (National Bureau of Statistics); ② China coal chemical project commissioning progress; ③ Hydro power output (Meteorological Administration)
| Bull | Bear |
|---|---|
| Shenhua/Shaanxi Coal 4-5% dividend yield vs. 1.7% government bond yield, spread attractive; long-term contracts lock in 75-85% of revenue | Shenhua PE 18.7x (98th percentile), dividend yield has fallen from 5-6% to 4.4%, profits declining for three consecutive years, absolute dividend amount continuously shrinking. The market has fully or even excessively priced in "certainty" |
Tracking indicators: ① China Shenhua interim dividend amount; ② 10-year government bond yield; ③ Shenwan Coal Index PE/PB percentile
| Scenario | Probability | Qinhuangdao Q5500 (RMB/t) | Newcastle ($/t) | Trigger Conditions |
|---|---|---|---|---|
| Bear | 25% | 600-700 | 80-100 | Indonesia RKAB revision boosts output to 700Mt+; China safety supervision eases; global recession depresses electricity demand |
| Base | 50% | 700-850 | 100-135 | Normalized safety supervision caps output elasticity; Indonesia DMO tightens but output remains elastically adjustable; high inventories limit upside |
| Bull | 25% | 850-1,000 | 135-160 | Indonesia export policy strictly enforced (DMO>30%+PT DSI); China safety supervision becomes a full-year constraint (output YoY decline >5%); extreme La Niña climate pushes up power demand |
Probability-weighted expectations: Qinhuangdao ≈ RMB 781/t, Newcastle ≈ $118/t — slightly below current spot (RMB 804/t, $129.51/t), reflecting the current near-term supply shock premium.
| Date | Event | Direction | Corresponding Dispute |
|---|---|---|---|
| July 2026 | Indonesia RKAB revision window opens (☠ high risk) | Bearish if raised to 700Mt+ | Dispute 1 |
| August 2026 | Peak summer coal consumption data | Demand test | Dispute 2 |
| August 2026 | China Shenhua H1 report + interim dividend | Dividend signal | Dispute 3 |
| September 2026 | Indonesia August production data | Supply test | Dispute 1 |
| October 2026 | 2027 thermal coal long-term contract negotiations begin | Long-term contract price direction | Dispute 3 |
| December 2026 | IEA Coal 2026 Annual Report | Demand forecast update | Dispute 2 |
| January 2027 | Mongolia cross-border railway expected to open | Coking coal supply shock | — |
| February 2027 | 2026 national raw coal output data | Full supply picture | Dispute 1 |
| March 2027 | China Shenhua 2026 annual report + final dividend | Dividend sustainability | Dispute 3 |
Matrix Interpretation:
The key logic of "bullish on cycle ≠ worth buying": Yankuang Energy is the most typical stock in the coal sector with cycle-return divergence — when coal prices rise 10%, profits may rise 30% (operating leverage), but when coal prices fall 10%, profits crash similarly. Under the current "oversupply narrowing but not disappearing" pattern, this high leverage is a double-edged sword, not suitable for defensive portfolios.
Beneficiary (Preferred):
China Shenhua Energy (601088): Full industry chain integration + 85% long-term contracts + 23% debt ratio, a truly "bond-like" coal company. 4.4% dividend yield remains attractive in a low-rate environment, but note PE 18.7x (98th percentile) — only justified if dividends don't shrink.
Shaanxi Coal Industry (601225): Gross margin of RMB 338/t is the highest in the industry; scarcity of high-quality thermal coal in northern Shaanxi supports long-term cost advantage. 60% long-term contracts balance stability and flexibility, the best expression of "high-quality coal + low cost."
China Coal Energy (601898): Coal chemical business opens growth ceiling; 103-year mineable life is the longest in the industry; PB 1.01x near book value provides margin of safety. Key is whether coal chemical capacity ramp-up delivers — if so, a re-rating from pure cyclical coal to "coal + chemical" growth stock.
Avoid:
Pure coking coal producers: Surge in Mongolian coal imports (+56% in H1 2026) + China steel output decline + Australian coking coal returning — triple pressure makes coking coal the weakest coal segment.
Mongolian coking coal exporters: Coking coal prices depressed by massive supply; after the China-Mongolia cross-border railway opens, logistics costs drop another 40%, further compressing price room.
| Scenario | Most Benefited | Most Hurt | Logic |
|---|---|---|---|
| Bear (Coal price 600-700 RMB) | Thermal power operators | Yankuang Energy, pure coking coal producers | Coal price falls near cost line, high-cost mines lose money; power benefits from cost decline |
| Base (700-850 RMB) | China Shenhua Energy, Shaanxi Coal Industry | Yankuang Energy | High long-term contract + low cost ensures steady profit; high spot exposure keeps earnings pressure |
| Bull (850-1,000 RMB) | Yankuang Energy, Shaanxi Coal Industry | Thermal power operators | Yankuang's 75% spot exposure has greatest upside leverage; Shaanxi Coal's low cost gives secondary profit elasticity |
Disclaimer: This report is based on public information and data and does not constitute investment advice. Coal prices are influenced by multiple unpredictable factors including policy, climate, and geopolitics. Investors should make independent judgments and bear risks.
Key Sources: IEA Coal 2025, National Bureau of Statistics, China Coal Industry Association, Wood Mackenzie, Mysteel/CCTD, Company annual reports, Indonesia ESDM, globalCOAL