Zhongtai: with abundant resource endowments, strong policy support, and strong economic advantages, it is expected that the scale of coal export from Xinjiang will continue to expand.

Zhongtai released a research report stating that Xinjiang has abundant coal resources and great potential for demand growth, and the strategic development position of Xinjiang coal will become increasingly prominent. The production and sales volume as well as the external transportation volume of Xinjiang coal are expected to accelerate. The capacity of the northern channel is expected to increase in both the short and long term, the profitability of regional companies is expected to continue to improve, and it is recommended to pay attention to Guanghui Energy (600256.SZ) and Guanghui Logistics (600603.SH). The former is located in the Hami Naomao Lake mining area of the Tuha Base, with the characteristics of low extraction cost and low extraction difficulty. The combination of low production costs and railway coordinated transportation advantages is expected to expand the company's external export radiation area. The latter has a stake in the construction of the Naoti Railway and a controlling stake in the Hongnao Railway, enjoying the advantages of external transportation in the northern wing area of Xinjiang and convenient transportation. The scale of railway transportation volume is expected to continue to expand. Zhongtai's main points are as follows: Superior foundation: Xinjiang coal resources are abundant, and the scale of external coal transportation is constantly increasing. The coal resources in Xinjiang are extremely abundant, with a total coal resource volume of about 2.19 trillion tons at depths of less than 2000 meters, accounting for about 39% of the total predicted coal resources in the country. With support from national policies, Xinjiang's strategic position as a "national large-scale coal supply guarantee base" is becoming increasingly prominent. By 2024, the growth rate of Xinjiang's raw coal production will be significantly ahead of the other three major production areas, and Xinjiang's share of the national raw coal production will continue to increase, reaching 11.36% in 2024. With the rapid increase in production, the growth of external coal transportation in Xinjiang is expected to accelerate, with a compound annual growth rate of 45.93% for the total volume of external coal transportation from 2017 to 2024. Channel construction: Railway capacity expansion and tapping the potential of highways to ensure the transportation of Xinjiang coal. 1) Railway capacity continues to expand, benefiting the depth of coal transportation. With the completion of the expansion of the Hongnao Railway (60 million tons/year), the upcoming completion of the expansion of the Naoti Railway (expanded to 150-200 million tons/year), and the opening of the Linha-Hongnao connection line, the Linha Railway is ushering in new development opportunities, while the Lanxin Railway and Geku Railway have completed capacity expansion (102.35 million tons/year and 33.57 million tons/year respectively). Under neutral assumptions, it is estimated that the railway external transportation volume of Xinjiang coal will be 100.21/108.71 million tons in 2025-2026. 2) The increase in the proportion of coal transportation is foreseeable, and the potential for external transportation of coal on highways is still huge. Assuming that the number of operating vehicles and the cargo tonnage of highways in 2025-2026 remains stable and increases slightly (with annual growth rates of 1%), and the proportion of coal freight remains stable and slightly increases in 2025-2026 (4.37%/4.50%), the estimated external transportation volume of coal on highways in Xinjiang will be 42.58/46.51 million tons. Low prices: The economic advantage of Xinjiang coal is significant due to the low production cost offsetting the disadvantage of transportation costs. Although the external transportation of Xinjiang coal is limited by long transportation distances and high transportation costs, the relatively low coal production costs and local prices in Xinjiang can offset this disadvantage. As of April 11, 2025, the price difference of coal terminal sales from Xinjiang to Gansu/Ningxia/Sichuan-Chongqing regions is about 180/111/71 yuan per ton, indicating that Xinjiang coal has a price advantage in entering the Gansu/Ningxia/Sichuan-Chongqing regions. Strong demand: Strong demand for coal in external transportation destinations, Xinjiang coal still has significant room for growth in external transportation. China Railway Urumqi Bureau Group Co., Ltd. stated that Xinjiang Railway strives to complete an annual external transportation task of 100 million tons of coal in 2025. based on the neutral assumptions, it is expected that the external transportation volume of Xinjiang coal by railway will be 100.21/108.71/116.73 million tons in 2025-2027, with year-on-year growth rates of 10.59%/8.48%/7.38%, respectively. The bank predicts that the Northwest and Southwest regions will still be the main destinations for external transportation of Xinjiang coal. 1) Northwest region: Railway expansion and economic development jointly promote the transportation of Xinjiang coal. With the expansion of the northern wing channel and the industrial construction in the northwest, it is expected that the consumption of raw coal by industrial enterprises above a certain scale in Ningxia will be 186.09/194.13/203.38 million tons in 2025-2027, with year-on-year growth rates of 3.88%/4.32%/4.77%; the coal consumption in Gansu Province will be 93.79/97.38/101.49 million tons, with year-on-year growth rates of 3.44%/3.82/4.23%. 2) Sichuan-Chongqing region: The coal supply-demand gap remains large, and the expansion of Xinjiang coal proportion is foreseeable. It is expected that the supply-demand gap for coal in Sichuan will remain high in 2025-2027, reaching 60.79/61.31/62.83 million tons; and the coal consumption by major thermal power plants in Chongqing will continue to increase in 2025-2027, reaching 31.43/34.16/37.29 million tons. Since 2021, the proportion of Xinjiang coal in major thermal power plants in Chongqing has continued to increase (from 2.90% in 2021 to 7.18% in 2024). Risk warning: The progress of railway construction is lower than expected, the macroeconomic situation is worse than expected, coal prices drop sharply, and the risk of outdated information used in the research report.