Last week, Qinhuangdao Port prices rose week-on-week, while Datong production area prices fell week-on-week. Port Thermal Coal: As of February 7, the market price for Shanxi-produced thermal coal (Q5500) at Qinhuangdao Port stood at 692 RMB/ton, up 1 RMB/ton week-on-week. Origin Thermal Coal: As of February 5, the pithead price for Yulin thermal lump coal (Q6000) in Shaanxi was 770 RMB/ton, unchanged week-on-week; Inner Mongolia Dongsheng large-block refined coal (Q5500) delivered price: CNY 628/ton, unchanged week-on-week; Datong Nanjiao sticky coal pithead price (tax-inclusive) (Q5500): CNY 567/ton, down CNY 1/ton week-on-week.

Thermal Coal Prices: This week, Qinhuangdao Port prices increased week-on-week, while Datong production area prices decreased week-on-week. Port Thermal Coal: As of February 7, the market price for Shanxi-produced thermal coal (Q5500) at Qinhuangdao Port was 692 RMB/ton, up 1 RMB/ton week-on-week. Production Area Thermal Coal: As of February 5, the pithead price for Shaanxi Yulin thermal lump coal (Q6000) was 770 RMB/ton, unchanged week-on-week; the truck-side price for Inner Mongolia Dongsheng large-lump refined coal (Q5500) was 628 RMB/ton, unchanged week-on-week; Da Tong Nanjiao sticky coal pithead price (tax-inclusive) (Q5500) was CNY 567/ton, down CNY 1/ton week-on-week. International thermal coal FOB prices: As of February 7, Newcastle NEWC5500 kcal thermal coal FOB spot price was USD 76.3/ton, up USD 1.5/ton week-on-week; ARA 6000 kcal/kg thermal coal spot price: $101.6/ton, down $1.5/ton week-on-week; Port Richard thermal coal FOB spot price: $82.5/ton, up $0.5/ton week-on-week.

Coking Coal Prices: This week, prices at Jingtang Port declined week-on-week, while prices at the production site in Linfen also decreased week-on-week. Port Coking Coal: As of February 5, the warehouse-delivered price (tax-inclusive) for Shanxi-produced main coking coal at Jingtang Port was CNY 1,700/ton, down CNY 80/ton week-on-week; Lianyungang Port's Shanxi-produced main coking coal delivered ex-warehouse price (tax-inclusive) was CNY 1,835/ton, down CNY 95/ton week-on-week. Production area coking coal: As of February 6, Linfen's fat coking coal delivered ex-factory price (tax-inclusive) was CNY 1,570.0/ton, down CNY 80.0/ton week-on-week; Yanzhou gas-washed coal ex-factory price: ¥980.0/ton, unchanged week-on-week; Xingtai 1/3 coking coal ex-factory price: ¥1,430.0/ton, unchanged week-on-week. International coking coal: As of February 5, Peakview Mine hard coking coal CIF China price: $265.6/ton, up $1.5/ton week-on-week.

Week-on-week decline in capacity utilization rates for thermal coal mines and coking coal mines. As of February 6, the capacity utilization rate for sampled thermal coal mines stood at 87.5%, down 0.8 percentage points week-on-week; the operational rate for sampled coking coal mines was 86.67%, down 2.5 percentage points week-on-week.

The coal economy is currently in the early stages of a new upward cycle, with fundamental and policy factors converging. Key fundamental changes last week: On the supply side, the capacity utilization rate of sampled thermal coal mines stood at 87.5% (-0.8 percentage points), while that of coking coal mines was 86.67% (-2.46 percentage points). On the demand side, daily coal consumption in 17 inland provinces decreased by 818,000 tons/day (-18.1%) week-on-week, while coastal provinces saw a decline of 163,000 tons/day (-7.22%). Regarding non-power demand, chemical industry coal consumption rose by 18,000 tons/day (+0.24%) week-on-week; steel blast furnace operation rate was 79.53% (+0.53 percentage points); cement clinker capacity utilization rate was 39.4% (-5.79 percentage points). Regarding prices, Q5500 coal at Qinhuangdao Port closed at 692 RMB/ton (+1 RMB/ton) this week; main coking coal at Jingtang Port closed at 1,700 RMB/ton (-80 RMB/ton).

Notably, unexpected disruptions emerged on the overseas supply side this week. The Indonesian government issued production quotas to major miners in January, reducing them by 40% to 70% compared to 2025 levels. This move drew opposition from industry associations, leading to a suspension of spot coal exports. Indonesia had previously halted exports briefly in 2022. The impact of this latest suspension and the exact scale of production cuts still require monitoring and verification. We believe Indonesia's setting of a 600 million ton coal production quota for 2026—a significant reduction from the 2025 actual output of 790 million tons—essentially reflects a supply-side structural adjustment driven by three objectives: safeguarding domestic demand, stabilizing fiscal health, and boosting prices. Although quota enforcement may adjust based on actual conditions like coal prices, the policy direction clearly signals Indonesia's intensified resource control to safeguard its economic interests. Indonesia's production regulation to support coal prices may become a future trend. Against the backdrop of rising resource nationalism overseas, the stability of coal exports from Mongolia and Australia faces potential risks, heightening the vulnerability of the global coal supply chain. Given the phased withdrawal of China's non-compliant supply capacity and expectations of tightening overseas coal supply, domestic coal supply is unlikely to see significant growth and may even marginally contract. Combined with resilient demand support, coal prices are expected to rebound throughout the year. With the sector's valuation remaining low, we highlight investment opportunities in this sector. Core Coal Sector Investment Thesis: Our Xinda Energy team maintains the following foundational investment logic unchanged: - Short-term supply-demand balance persists, but medium-to-long-term shortages remain - Coal prices have bottomed out and established a new upward trajectory - High-quality coal enterprises retain core attributes of high profitability, strong cash flow, and high ROE, and high dividends (ROE of 10-15%, dividend yield >5%, with new mid-term dividends added), and the assessment that coal assets remain relatively undervalued with overall valuation upside potential (high premiums in the primary mining rights market, most companies trading at around 1x PB). Additionally, public funds hold underweight positions in coal. Therefore, the coal sector allocation strategy must leverage its dividend characteristics while capturing pro-cyclical elasticity. Specifically, downward corrections in coal stocks are marginally supported by high dividends, while upward elasticity is catalyzed by expectations of rising coal prices. Combined with the potential for valuation re-rating and significant upside once coal prices confirm a bottom, coal assets remain attractive for their value proposition, high probability of success, and favorable risk-reward ratio. We maintain a firm bullish stance on coal and reiterate our recommendation to allocate at lower levels.

Overall, against the backdrop of energy inflation, the tight supply-demand dynamics in coal will persist over the next 3-5 years. High-quality coal enterprises maintain their attributes of high barriers to entry, strong cash flow, generous dividends, and high dividend yields. Coupled with the bottoming-out of coal prices driving sector revaluation, the sector offers both offensive and defensive investment characteristics with high cost-effectiveness. The recent short-term pullback has highlighted significant investment value, and we reiterate our recommendation to focus on the current allocation opportunities in coal.

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