Northeast: Coal prices bottoming out, rebound expected, actively positioning for dividend coal stocks.

Northeast released a research report stating that the imbalance between supply and demand is expected to lead to a decline in coal prices in the first quarter of 2025, with the supply and demand situation remaining loosely balanced throughout the year. In the short term, coal prices may have already been oversold. Following the decline in coal prices, it is anticipated that certain high-cost domestic coal mines and imported coal will be impacted, which could potentially drive coal prices to rebound in April. Additionally, it is necessary to monitor the impact of US tariff policies on the domestic economy and the response of domestic policies. With a decrease in interest rates and a decline in risk appetite, dividend coal stocks are expected to benefit. It is recommended to select dividend coal stocks that have stable performance and high dividends, as well as coal-aluminum integrated companies that benefit from the improving aluminum industry. Key points from the report on Northeast are as follows: Pressure on demand and increased supply lead to a decline in coal prices in the first quarter of 2025 In the first quarter of 2025, the price of power coal at Qinhuangdao Port fell from 765 yuan/ton to 665 yuan/ton, and the price of main coking coal at Jingtang Port dropped from 1520 yuan/ton to 1380 yuan/ton. Due to higher winter temperatures this year, electricity generation in January and February decreased by 5.8% compared to the same period last year, and pig iron production decreased by 0.5%. Imports of coal increased by 2.1%, while coal production in Shanxi in the first two months grew by 7.7%. The imbalance between supply and demand led to the decline in coal prices. Supply and demand are expected to be loosely balanced in 2025, with short-term coal prices potentially oversold Total supply in 2025 is expected to increase by 1.9%, with domestic coal production growing by 2.1% and no growth in imported coal. Total demand is forecasted to increase by 1.5%, with coal consumption in power generation, coking, cement, and chemical industries growing by 2%, -1%, -5%, and 10% respectively. Referring to historical declines in coal prices, the average price of power coal in 2025 is estimated to be 741 yuan/ton, and the average price of coking coal is forecasted to be 1794 yuan/ton. Short-term coal prices may have already been oversold. Expected end to the decline in coal prices in April, with a rebound until October Coal prices have experienced a significant decline over the past three months, and have fallen below the annual benchmark price. The benchmark price provides strong support, making it easier for coal prices to rise than fall in the future. Power plants are continuing to reduce their coal inventory, and there is potential for a phased replenishment of stocks in April. The peak season for coal demand is approaching in the summer, and with a global trend towards warming, demand may exceed expectations. The high base of hydroelectric power generation last year is expected to lead to a slowdown in growth, while coal-fired power generation is expected to increase. Following the decline in coal prices, it is expected that certain high-cost domestic coal mines and imported coal will be impacted, driving a potential rebound in coal prices in April. It is also important to monitor the impact of US tariff policies on the domestic economy and the response of domestic policies. Long-term coal prices are on an upward trend, with the bottom rising The average price of power coal reached a temporary low of 420 yuan/ton in 2015, and it is expected that in the following 10-15 years, the annual average price of power coal will increase by 200 yuan/ton to around 620 yuan/ton, while the annual average price of coking coal is expected to rise to 1240 yuan/ton. To initiate a new upward cycle for coal, strong policy support is needed Since reaching its peak in 2021, coal prices have been declining for nearly four years. Looking at the timeline, the previous peak in the coal price cycle was in 2011, followed by a downturn until the end of 2015. Currently, coal prices may not be far from the bottom of the cycle, but in order for coal to begin a new cycle of significant growth, strong policy support is needed. This includes stimulating demand through stronger policies in real estate and infrastructure, as well as supply-side measures such as production restrictions for coal enterprises and limitations on coal imports. Risk warnings: Economic recovery falling short of expectations, safety production risks, and stronger-than-expected coal imports.