Long-term increase in coal prices with significant demand, Guotai (515220) coal ETF surges 2%

Due to significantly stronger demand, coal prices are expected to rise over the long term. On April 7, the Cathay CSI Coal ETF (515220) jumped 2%.

Guohai Securities noted that, from a broader perspective, the logic of supply-side constraints in the coal mining industry has not changed. On the demand side, there may be periodic ups and downs and price will also show a certain degree of range-bound movement and dynamic rebalancing. Looking back at 30 years of industry experience, coal prices have displayed a trend of moving higher amid volatility. The underlying drivers include a rigid rise in labor costs, continued increases in safety spending and environmental protection spending, higher prices for raw materials such as thermal coal feedstock and other bulk commodities, and local governments increasing their efforts to levy taxes. From the overall long-term development trend of the industry, these drivers still exist. In the long run, there remains demand for coal prices to rise. The process may be full of twists and turns, but the direction should be clear.

Leading coal enterprises have high asset quality, ample cash flow on their books, and exhibit five “highs” characteristics: high profitability, high cash flow, high barriers, high dividends, and high safety margins. At the same time, starting in 2025, several coal central state-owned enterprises have launched share-buying and asset injection plans for their listed subsidiaries, which has also released positive signals and demonstrates confidence in coal companies’ development, while enhancing enterprises’ growth potential and stability.

The Cathay Coal ETF (515220) tracks the CSI Coal Index (399998). This index selects securities of listed companies involved in coal mining, processing, and other related areas from the Shanghai and Shenzhen markets as its index constituents, in order to reflect the overall performance of securities of coal-related listed companies. The index has a high degree of diversification. The industry distribution is mainly coal mining, with thermal coal and coking coal as the main sub-sectors, showing strong cyclicality and high dividend attributes.

Risk warning: The mention of individual stocks is only for industry event analysis and does not constitute any recommendation or investment advice for any individual stock. Short-term gains and losses of an index are for reference only and do not represent its future performance, nor do they constitute any commitment or guarantee regarding fund performance. Views may be adjusted as market conditions change, and do not constitute investment advice or commitments. The risk-return characteristics of the funds mentioned differ from one another. Investors are kindly reminded to carefully read the fund legal documents, fully understand the product elements, risk levels, and the principles of profit distribution, and choose products that match their own risk tolerance, and to invest prudently. For fund fee rates involved, please refer to the legal documents.

Daily Economic News

(Edited by: Zhang Xiaobo)

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