CITIC Securities: Optimistic about coal prices in Q2; the sector is expected to kick off a new round of market rally

CITIC Securities noted that among the coal-listed companies in the tracked sample, the net profit growth year over year on a cumulative basis for the first quarter of 2026 may increase by 2.2%. Thermal coal companies may see a slight year-over-year increase overall, while metallurgical coal companies’ overall year-over-year performance is expected to improve rapidly. CITIC Securities is optimistic about coal price performance in the second quarter. Even if the Middle East conflict eases, it will take time for energy supply to recover; combined with the seasonal summer peak demand release in the Northern Hemisphere, domestic and international coal prices may form a resonance in the middle-to-late period of Q2. The effect of rising coal and chemical prices in Q2 is also expected to be fully reflected. Once the market forms a new catalyst for its expectations of coal prices, the sector is expected to start a new round of行情.

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Coal | Q1 YoY steady; price-hike effect may show up in Q2: 2026 Q1 performance outlook

For the coal-listed companies in the sample we track, the net profit on a cumulative basis for 2026Q1 may grow year over year by 2.2%, with thermal coal companies seeing a slight year-over-year increase overall and metallurgical coal companies expected to improve quickly year over year. We are optimistic about Q2 coal price performance. Even if the Middle East conflict eases, energy supply recovery will take time; coupled with the release of summer peak demand in the Northern Hemisphere, domestic and international coal prices may form a resonance in the middle-to-late period of Q2. The effect of higher coal and chemical prices in Q2 is also expected to be fully reflected. Once the market forms a new catalyst for its expectations of coal prices, the sector is expected to start a new round of行情.

▍In 2026 Q1, industry average prices show mixed year-over-year gains and declines; metallurgical coal improves noticeably.

In 2026 Q1, year-over-year performance differs across average prices for various coal types. Most of the time, average prices of thermal coal decline slightly year over year. As a benchmark thermal coal price, the Qinhuangdao 5500 kcal thermal coal market price averaged about 719 yuan/ton, representing a year-over-year decline of about 1.5%; the corresponding annual long-term contract (LTC) coal price declined by only 1.16% year over year. The year-over-year price drop for anthracite coal is generally more than 10%. Metallurgical coal shows the best year-over-year performance; for most pricing benchmarks, year-over-year increases exceed 10%.

▍In 2026 Q1, the net profits of the sample listed companies we track may grow year over year by 2.2%.

According to data from the National Bureau of Statistics, in the first two months of 2026, coal mining and washing and screening industries’ above-scale enterprises achieved total profits of 53.13 billion yuan, up 4.88% year over year. We expect that the cumulative net profit year over year for the sample listed companies in the coal mining segment that we mainly track will grow by about 2.2% in 2026 Q1. Specifically, the net profits of major companies in thermal coal/metallurgical coal/anthracite coal are expected to change year over year by +1%/+21%/-19%, respectively. Leading thermal coal companies’ performance is stable with growth, as their annual LTC proportion is relatively high and the year-over-year decline in annual long-term contract prices is small. Metallurgical coal companies’ performance improvement is the most significant, driven by the substantial year-over-year rise in coal prices and the low-base effect.

▍Short-term fundamentals outlook: We continue to look favorably on the coal price trend in Q2; the coal price rise effect may be even more fully reflected in Q2.

Since the beginning of this year, coal prices have gradually rebounded, driven by expectations of lower production quotas for Indonesia and factors such as the Middle East conflict. Although domestic coal spot prices have risen relatively slowly, we expect the coal price center of gravity in Q2 to continue rising. We have three main reasons: 1) Summer peak season demand domestically and internationally may begin to form a resonance starting in late May, and in addition, markets such as Japan and South Korea have structural substitution demand for high-calorie coal for natural gas; overseas coal prices may enter a new round of rising channel, supporting increases in domestic spot prices; 2) domestic thermal power demand has performed better than expected this year, and the subsequent trend is expected to continue; 3) coal-to-chemicals’ profitability remains at a high level, which may further increase the demand for coal used in chemical production. We expect the average price of thermal coal in Q2 may rise to above 800 yuan/ton, and coking coal prices may also increase quarter over quarter. From a year-over-year perspective, the price-hike effect of coal and chemical products may be fully revealed. The year-over-year change in average prices may show a major improvement, and Q2 sector earnings growth year over year may be even stronger.

▍Risk factors:

Geopolitical conflicts ease, and overseas coal production cuts fall short of expectations, leading to a systematic drop in international coal prices; macroeconomic fluctuations affecting coal demand and coal prices; a relaxation of regulatory enforcement (on safety/production oversight), leading to increased supply; weather-related disruptions that may affect coal price expectations.

▍Investment strategy: The rebound effect in coal prices and earnings may gradually become visible; we like the Q2 sector outlook.

Repeated expectations of conflict in the Middle East may disrupt the situation again and again, and volatility in energy prices domestically and internationally may increase, but the overall trend is upward. If conflicts in the region persist afterward, coal prices may rise beyond expectations. Even if the conflict eases, it will still take time for the Strait of Hormuz passage and the Middle East region’s energy production to recover to pre-conflict levels. Therefore, the current situation is broadly favorable for improving domestic coal price expectations in Q2. After the sector adjusts, if new catalysts emerge for coal price expectations, the market may continue to move higher. At the same time, from coal price and related chemical product price expectations, the price-hike effect since the conflict may be more fully reflected in Q2, which is favorable for the Q2 peak-season market in the sector.

（Source: People’s Finance News）