Zhongjin: Increased Overseas Coal Supply Disruption Increases Risk and Warms up Coal Price Upside.

CICC released a research report stating that according to recent reports from the market media, the production quota of some coal enterprises in Indonesia for RKAB coal in 2026 has significantly decreased. This reflects the Indonesian government's intention to reduce the country's coal production, with the production in 2026 expected to be reduced to around 600 million tons (actual production in 2025 was 820 million tons). If this level of production cut is ultimately implemented, the supply of sea-borne thermal coal may significantly tighten, providing good support for thermal coal prices. Considering the expectation of a contraction in domestic production, the risk of tightening coal supply is increasing, which is favorable for the upward trend of coal prices. CICC's main points are as follows: Expectation of a contraction in the supply of Indonesian thermal coal According to recent reports from the market media, some coal enterprises in Indonesia have received significantly reduced production quotas for RKAB coal in 2026, with a decrease of 40% to 70% compared to the levels in 2025. This reflects the Indonesian government's earlier intention to reduce the country's coal production, aiming to reduce the production to around 600 million tons in 2026 (the actual production in 2025 was 820 million tons). Indonesia is the world's largest exporter of thermal coal, accounting for 40% to 50% of global thermal coal export supply. In 2025, China imported 209 million tons of Indonesian thermal coal, accounting for 56% of the total imported thermal coal in China. CICC believes that if this level of production cut is implemented, the supply of sea-borne thermal coal may significantly tighten, providing good support for thermal coal prices. However, there is still uncertainty about the magnitude of the expected production cut (RKAB approvals have not yet been finalized; there is still a game between the government and the market). It is estimated that the price difference between domestic and Indonesian thermal coal has already reversed, and if the international thermal coal prices continue to rise, China's enthusiasm for importing thermal coal may continue to weaken. Expectation of a contraction in domestic coal production CICC believes that as the deadline for the substitution of increased production capacity in September 2021 approaches (most of which require completion by the end of 2025), some non-compliant or incompletely licensed production capacity may face the risk of withdrawal of approval for increased production. According to incomplete statistics, the scale of such increased production capacity exits may exceed 100 million tons per year. If the policy is strictly enforced, it will significantly offset the limited increment of new mines, and under this background, the annual growth rate of domestic raw coal production in 2026 may turn negative. Structural shortage of coking coal becomes apparent Since the beginning of the year, the international coking coal market supply has further tightened. As of February 3rd, the FOB price at Port of Newcastle for premium coking coal has increased by $35/ton (or 15%) to $265.4/ton compared to the beginning of the year, mainly due to the impact of tropical cyclones and heavy rainfall in Australia early in the year, which restricted the production and transportation of some coal mines. In addition, the Indian government has recently officially classified coking coal as a "key strategic mineral," aiming to strengthen its domestic steel supply chain security, which may intensify the global competition for high-quality primary coking coal resources. In general, with tightening supply and stable global steel demand, coking coal has rebound potential in the short term. However, considering that Mongolia continues to increase its export target for 2026 to 90 million tons, there are still constraints on the upper limit of coking coal prices for the year. In the medium to long term, the resource value of high-quality primary coking coal is still promising, while the price difference between primary and secondary coking coal may continue to widen. Risk factors Demand recovery is slower than expected; oversupply is released more than expected.