Coal prices have accelerated their upward trajectory recently, with the benchmark thermal coal price rising to RMB 972.75 per tonne on September 9, an 11.11% jump from RMB 875.50 at the start of the month, according to data from生意社. On September 4, the Qinhuangdao Q5500 thermal coal spot price had already surpassed the key RMB 950 per tonne threshold. In the secondary market on September 9, the coal sector rallied, with shares of 力量发展 (01277) climbing 4.67% to HK$2.13, Yankuang Energy (01171) advancing 2.76% to HK$13.79, China Shenhua (01088) rising 2.72% to HK$46.86, and China Coal Energy (01898) gaining 1.40% to HK$11.57 by the close.

A confluence of supply-side shocks is underpinning the sustained coal price gains. On the domestic production front, mine restarts remain sluggish under stringent safety inspections, while new capacity development requires a lengthy 3-5 year cycle, with medium-to-long-term capacity utilization already peaking. The phase-out of over-capacity is accelerating the supply contraction, and lower railway dispatch volumes have led to rapid destocking at ports. From January to July 2026, national raw coal production fell 3.2% year-on-year, including 9.5% and 9.9% declines in June and July, respectively. The operating rate across 442 mines in the three provinces of Shanxi, Shaanxi, and Inner Mongolia has dropped to 78.18%, while Shanxi's mine operating rate stands at just 62.87%, marking a multi-year low for the period. On the import side, supply remains constrained due to disrupted inland river transportation in Indonesia and tight RKAB quotas. El Ni帽o has exacerbated drought conditions in Indonesia, making July its driest month since 1991, with first-half coal output down 4.2% and exports down 3.2% year-on-year. Additionally, the implementation of a single export channel policy starting in September is amplifying supply disruptions.

In terms of sector earnings, the coal industry recorded RMB 1,359.8 billion in revenue for the first half of 2026, up 9.3% year-on-year, with total profits reaching RMB 210.7 billion, a 41.1% increase, according to Wind data. Second-quarter profitability improved sequentially, with revenue of RMB 722.1 billion (up 13.2% quarter-on-quarter) and total profits of RMB 125.0 billion (up 45.9% quarter-on-quarter). On a stock-by-stock basis, Wind data shows 盘江股份's first-half net profit surged 575.55% year-on-year, 恒源煤电 rose 227.41%, 甘肃能化 gained 182.94%, and 兰花科创 increased 103.87%. Among sector leaders, China Shenhua saw revenue up 7.93% and net profit up 5.22%; 陕西煤业's net profit grew 38.37%; and Yankuang Energy's net profit climbed 33.97%.

Guotai Haitong's research note highlights that the combination of supply shocks has pushed coal prices higher, leading to a broad profitability recovery in the coal sector. By segment, thermal coal producers saw greater earnings improvements than coking coal producers during the first half. With domestic output declining notably, import demand has risen substantially, and the firm expects imports to increase in the second half, acting as a supplement to the domestic reduction. The brokerage believes the coal sector bottomed out in 2025, and with tightening supply-demand dynamics amid domestic and overseas supply disruptions in 2026, the coal price center will rise significantly, underpinning clear fundamental improvements.

China Galaxy Securities notes that coal prices have continued to rally this year due to tighter Indonesian export policies and Middle East geopolitical conflicts. Coal companies have benefited from higher prices, with overall net profits attributable to shareholders, profitability, and cash flows all recording robust growth. Semi-annual data shows that in the first half of 2026, the Shenwan coal sector generated RMB 668.2 billion in revenue, up 15.6% year-on-year, with attributable net profits of RMB 68.9 billion, a 28.6% increase. The firm recommends focusing on coal price-sensitive plays with high spot price exposure, cost advantages, and capacity growth potential, as well as leading companies with strong resource reserves, cost efficiency, and high dividend commitments.

Goldman Sachs has also issued a report, suggesting that while first-seven-month imports rose year-on-year, they are insufficient to offset the domestic supply gap, offering limited buffering. On the demand side, the landscape features overall electricity consumption growth, volatile thermal power output, and weak non-power demand. Current fundamentals include low mine output and low inventories, with power plant daily consumption peaking during the summer season but still elevated. Tight supply at production sites and firm pithead prices have exacerbated the inversion of transport costs, leading to rapid port destocking. Given that power plant inventories are significantly below year-ago levels, winter stockpiling is likely to be aggressive, potentially driving a rapid coal price rally.

Among the key related stocks, China Shenhua (01088) reported interim results for the six months ended June 30, 2026, with revenue of RMB 189.338 billion, up 7.9% year-on-year, and net profit attributable to owners of RMB 31.054 billion, up 1.9%, translating to earnings per share of RMB 1.448 and an interim dividend of RMB 0.98 per share. The company highlighted its high-quality coal resources in the Shendong, Zhungeer, Zhundong, and Xinjie mining areas, with proved coal resources of 101.08 billion tonnes and proved recoverable reserves of 35.77 billion tonnes under Chinese standards as of June 30, 2026.

Yankuang Energy (01171) posted interim results for the six months ended June 30, 2026, with sales revenue of RMB 70.231 billion, up 15.4% year-on-year, and net profit attributable to shareholders of RMB 7.875 billion, a 57.2% increase, with earnings per share of RMB 0.78. In the first half of 2026, the group's coal exploration expenditures totaled RMB 13.1529 million, mainly for new mine exploration projects, while capital expenditures related to coal development and extraction reached RMB 3.790 billion, primarily for fixed asset investments at existing mines and development costs at the Wucaiwan No. 4 open-pit mine, Youfanghao, and Yangjiaping coal mines, as well as operations at Yancoal Australia and Yancoal International.

China Coal Energy (01898) reported results for the six months ended June 30, 2026, with revenue of RMB 73.136 billion, down 1.8% year-on-year, and net profit attributable to shareholders of RMB 8.192 billion, up 11.8%, with basic earnings per share of RMB 0.62 and an interim dividend of RMB 0.184 per share. Meanwhile, 中国秦发 (00866) posted first-half 2026 revenue of RMB 1.179 billion, up 8.23% year-on-year, and a profit attributable to owners of RMB 227 million, a reversal from a loss of RMB 126 million in the prior-year period, with basic earnings per share of RMB 0.0867. The increase in profit attributable to equity holders was driven by higher average thermal coal selling prices and a provision change gain of RMB 165 million (versus nil in 2025).