Guotai Haitong: Rigid supply bottoming out, resilient demand trending upward, strategically bullish on global coal resources.

Guotai Haitong released a research report stating that the bottom of the coal sector was established in 2025. In 2026, due to supply disruptions at home and abroad, coal supply will become tighter, and the price center for coal is expected to rise significantly, with notable improvements in the fundamentals, warranting focused attention. Strategically bullish on global coal resources, the geopolitical conflicts in 2026 merely expedite the arrival of a tight global supply-demand balance; from a medium to long-term perspective, as demand continues to rise while trade volumes shrink, the marginal pricing of global coal becomes clearer, and the price center for coal is likely to continue to increase. The main viewpoints of Guotai Haitong are as follows: Looking ahead to the second half of the year, the key factors affecting coal prices have shifted from overseas to domestic. Reviewing the first half of 2025, there were continuous supply-side disturbances both domestically and abroad, first with Indonesia's production limits, followed closely by the U.S.-Iran war, which led to a significant rise in global energy prices. The increase in overseas coal prices caused a drop in imports, and domestic coal prices also rose in tandem. On May 22, a major coal mine safety incident occurred in Shanxi, prompting significant tightening of safety regulations in production areas, which led to a noticeable contraction in domestic supply and a rapid rise in coal prices. Looking toward the second half of the year, this firm believes that the key factors affecting coal prices will shift back to domestic concerns, with nationwide safety regulations remaining strictly enforced, far exceeding market expectations in both intensity and duration. Coal production is expected to decline sharply, especially in Shanxi Province. The introduction of the 14th Five-Year Plan for the coal industry indicates that long-term supply elasticity for coal is narrowing, which is favorable for maintaining coal prices in a reasonable upper range. Additionally, on the import side, Indonesia's production targets have been revised upwards, the U.S.-Iran conflict has eased, and overseas disturbance factors are gradually being digested. However, with significant declines in domestic production, demand for imports is expected to rise markedly, predicting an increase in import volumes in the second half of the year to serve as a supplement in the face of domestic reductions. Demand remains robust, and medium to long-term coal supply and demand are expected to maintain relative tight balance. From the demand side, overall demand since the beginning of the year has remained on par with previous years, slightly below earlier market expectations for increased demand due to the El Nio climate conditions, which has also constrained peaks in coal prices. Looking ahead to the second half of the year, this firm believes that with low supply, as long as average demand levels of previous years are maintained, coal prices can operate at relatively high levels. Furthermore, once demand sees any increase, coal prices will have significant upward elasticity, making them prone to rise and difficult to fall. In the medium to long term, new productive forces such as A, electric vehicles, and high-end manufacturing are becoming the core drivers of electricity growth, with robust resilience in power demand. Meanwhile, as new energy generation enters a period of "high-quality development," the pressure on thermal power is expected to gradually weaken, indicating that the coal supply and demand will likely maintain a relatively tight balance in the medium to long term. From a global perspective on energy. This firm reaffirms its bullish outlook on the "global energy supercycle" over the next 5-10 years, driven by increased residential electricity demand resulting from AI and global climate warming. Global electricity demand is undergoing a significant transformation characterized by rapid growth and changing demand structures. This firm is optimistic about the critical role of base load power (natural gas, coal, nuclear energy) in enhancing the stability of electricity systems and better meeting emerging electricity demands, thereby creating sustained and stable upward demand potential. Coal-fired power is transitioning from an asset earmarked for phase-out under a de-carbonization framework into an indispensable reliable capacity and fuel security "keystone" within the global electricity system, with its asset duration, utilization rate, and valuation system likely to undergo systematic reassessment. This firm is strategically bullish on global coal resources, believing that the geopolitical conflicts in 2026 merely hasten the arrival of a tight global supply-demand balance; from a medium to long-term perspective, as demand continues to increase while trade volumes shrink, the "marginal pricing" of global coal becomes clearer, and the price center for coal is likely to keep rising. Risk Warning: Macroeconomic growth may be below expectations, import volumes may exceed expectations, and supply may be released beyond expectations.