GTHT (Guotai Haitong) has released a research report indicating that a combination of multiple supply-side shocks has driven coal prices steadily higher, leading to a comprehensive earnings recovery across the coal sector. Looking at specific sub-sectors, thermal coal companies experienced stronger earnings improvements during the first half compared to coking coal producers. With domestic production declining notably, import demand has risen substantially, and the firm expects import volumes to increase in the second half of the year, serving as a supplementary source amid domestic output reductions. The brokerage believes the sector's bottom was established in 2025, and with supply-demand dynamics tightening under both domestic and international supply disruptions in 2026, the coal price center is expected to rise significantly, delivering clear fundamental improvements.
Where the market stands now
Multiple supply shocks have converged to push coal prices steadily upward. Reviewing the first half of 2026, supply-side disruptions both at home and abroad were persistent—starting with production restrictions in Indonesia, followed by the US-Iran conflict that sent global energy prices soaring. Higher overseas coal prices reduced imports, while domestic prices followed the upward trend. On May 22, a major coal mine safety accident in Shanxi triggered a significant tightening of safety inspections at production sites, sharply contracting domestic supply and accelerating coal price gains.
Looking ahead to the second half, the firm believes the key factor influencing coal prices will shift from overseas back to domestic markets. Nationwide safety inspections remain stringent, with both intensity and duration far exceeding market expectations, leading to noticeable declines in coal production—particularly in Shanxi Province. The introduction of the 15th Five-Year Plan for the coal industry has narrowed the long-term supply elasticity of coal, supporting a coal price center that remains in the upper range of a reasonable band. On the import side, Indonesia has raised its production targets, and with the easing of the US-Iran conflict, overseas disruptions are gradually being absorbed. Given the notable domestic production decline, import demand has surged, and the firm projects higher import volumes in the second half, acting as a buffer to domestic reductions.
Earnings snapshot
The coal sector's profitability has seen a broad recovery. In the first half of 2026, as coal prices climbed, coal enterprises experienced a comprehensive earnings rebound. The industry recorded total revenue of 1,359.8 billion yuan, up 9.3% year-on-year, with total profits reaching 210.7 billion yuan, a 41.1% increase year-on-year. In the second quarter, profitability improved further compared to the first quarter, with revenue of 722.1 billion yuan (up 13.2% quarter-on-quarter) and total profits of 125 billion yuan (up 45.9% quarter-on-quarter).
By sub-sector, thermal coal companies saw greater earnings improvements than coking coal producers in the first half. Although coking coal market prices posted stronger gains during the period, major coking coal producers such as Shanxi Coking Coal and Huaibei Mining operate under long-term contract pricing, meaning their price increases lagged market rates and were less pronounced. Additionally, following the late-May mine accident, coking coal companies faced significant output reductions due to heightened safety inspections, which also pushed up costs. As a result, coking coal companies' earnings did not grow as sharply as coal prices might have suggested.
Operational outlook
The substantial rise in coal prices has boosted earnings, though costs have edged slightly higher. Price remains the single most important factor driving industry performance. In the first half of 2026, the average selling price for self-produced coal across 17 A-share listed companies stood at 594 yuan per ton, up 11.4% year-on-year, while average per-ton coal costs rose 2.6% to 369 yuan per ton. The price uptick is the core driver lifting industry results. For the second half, the firm expects the coal price center to climb further, supporting stronger earnings for coal companies.
Financial health
Operating cash flow has increased markedly, and the sector's financial and asset positions remain solidly on an upward trajectory. As profitability improves, coal companies have seen a significant rise in operating cash flow. In the first half of 2026, the sector's net cash flows from operating, investing, and financing activities were 129.9 billion yuan, -93.2 billion yuan, and 1.1 billion yuan, respectively, compared to 94.8 billion yuan, -83.7 billion yuan, and -10.9 billion yuan in the same period of 2025. While the debt ratio has ticked up slightly, cash on hand remains ample. Moreover, with higher revenues, the selling, administrative, and financial expense ratios have all declined, underscoring a steady improvement in the financial and asset stability of coal enterprises.
Risk factors: Economic growth falling short of expectations, large-scale coal imports, and supply exceeding forecasts.