Guotai Haitong: Coal Begins a New Upward Cycle, Recommending Leading Stocks with Growth Potential and Increased Volume over the Next Five Years

Guotai Haitong released a research report stating that the bottom of this cycle in the coal sector has been confirmed in Q2 2025. The supply and demand pattern has shown a turning point, and a new upward cycle is expected to begin by 2026. The report reaffirms a strategic bullish outlook on the large energy cycle over the next 5-10 years and recommends positioning in the global market with Yankuang Australia (03668); for A-shares, it suggests leading companies with growth potential in volume over the next five years.

Guotai Haitong’s main points are as follows:

Review of the 2025 coal market: a “double-edged” situation in the first and second halves of the year

The firm believes that the core reason for the first half of 2025 was demand deficiency caused by weather factors, combined with the massive coal imports in Q4 2024 and high inventory levels from major domestic production areas. This led to a sharp decline in coal fundamentals in H1 2025, with prices continuously breaking through key levels of 800, 770, 700, and 650 yuan/ton, and market expectations that coal prices would gradually fall to the “bottom” of industry losses in 2015. Since June, with the peak summer electricity demand, the total social electricity consumption in 2025 has already recovered by 5%, disproving the market’s pessimistic demand outlook. Meanwhile, since July, efforts to curb overproduction have driven domestic output to shrink, gradually shifting the supply-demand balance to a tighter state. The supply and demand pattern has reversed from H1, and coal prices have entered a rapid upward channel.

Looking ahead to 2026: the start of a new upward cycle

The firm holds a relatively optimistic view on the new upward cycle in coal starting in 2026, with demand being the core driver and supply playing a complementary role. From the demand side, emerging sectors such as AI, new energy, and urban-rural electricity needs are increasingly contributing to incremental electricity consumption. Power demand is becoming less sensitive to economic fluctuations and is expected to maintain a good growth rate of over 5%. Additionally, the 136th document issued in 2025 has led to a significant decline in new photovoltaic installations starting June 2025. Coupled with the shift in policy focus from broad subsidies to targeted support for wind and nuclear power after the National Day holiday, economic pressures may slow down new capacity additions, marking a new phase of “slowing down while improving quality” in renewable energy development. As total electricity consumption continues to grow steadily, the decline in new renewable capacity installations will reduce the pressure on thermal power replacement, and the demand for coal in thermal power generation is expected to recover. On the supply side, since July, the National Energy Administration has focused on addressing coal “overproduction,” which is likely to continue suppressing the rebound of coal prices and limit the elasticity of domestic output growth. Additionally, high overseas energy demand and Indonesia’s production restrictions may lead to stagnant or reduced imports. Overall, supply in 2026 may remain flat compared to 2025, and the overall supply-demand pattern is expected to continue improving. It is anticipated that coal prices in H2 2026 could fully return to above 800 yuan/ton.

Global energy outlook

Demand is surging, but supply structures are not keeping pace, indicating a potential long-term turning point for thermal coal. From a strategic perspective, the global energy outlook remains bullish. Driven by deep electrification in industry, rapid expansion of data centers powered by AI, and extreme climate impacts under global warming, global electricity demand is exceeding expectations. However, especially in developed countries like Europe and the US, renewable energy sources and aging grid systems cannot provide stable power supplies for AI applications. Combined with extreme climate events that push demand peaks, coal continues to play a crucial role as an “anchor” energy source. From a global perspective, the pressure on coal in Europe and the US has eased, and the US has seen its first significant increase in coal consumption in the past decade.

Risk warnings: macroeconomic growth falling short of expectations, import volumes exceeding expectations, and supply releasing more than anticipated.