Coking coal production remains constrained, with stronger short-term price support than thermal coal

Overview

This report is Morgan Stanley's weekly update on China's coal sector, focusing on price changes in thermal coal, seaborne coal, and coking coal, as well as production resumptions and shutdowns on the supply side of Shanxi coking coal. The report argues that thermal coal prices saw a slight correction, seaborne coal fell more noticeably, while domestic coking coal remained relatively resilient due to supply constraints and low inventories.

Core views

The core view is that domestic coking coal fundamentals are better than those of thermal coal in the short term. The resumption of production capacity in Shanxi Province has progressed slowly, and shutdowns have increased in Luliang, Lingshi, Gujiao, and other areas due to safety inspections. Only one mine in Qinyuan City has resumed production, leading sample coking coal output to decline 1.3% last week to 4.97mmt. The drop in supply, together with low mine-site inventories, is expected to continue supporting coking coal prices in the near term. By contrast, thermal coal and seaborne coal prices have pulled back, suggesting that the overall coal sector still warrants a cautious view.

Analysis framework

The report uses a weekly high-frequency tracking approach, comparing the WoW and YTD performance of major coal price indices and spot prices, YTD averages, 2025 averages, and the difference versus 2025, while also incorporating Shanxi coal mine safety inspections, production resumption progress, and mine-site inventories to assess price support.

Methodology notes

• High-frequency price trackingWeekly coal price and inventory monitoring

  Compare indicators such as 26-Jun, WtW, YTD, YTD avg, '25 avg, and YTD vs '25

  By tracking weekly changes in thermal coal, coking coal, seaborne coal, and inventory indicators, the report identifies whether price momentum and inventory support are improving or deteriorating.

• Supply constraint analysisTracking coking coal production resumptions and safety inspections

  Shanxi coal mine resumption progress, scope of shutdowns, and sample coking coal output

  The report treats safety inspections and production resumption conditions in places such as Luliang, Lingshi, Gujiao, and Qinyuan in Shanxi as key variables explaining the decline in coking coal output and the resilience of prices.

• Industry rating frameworkMorgan Stanley industry view framework

  Cautious industry view and 12-18 month relative performance judgment

  Morgan Stanley uses Attractive, In-Line, and Cautious to describe expected sector performance relative to the broader market benchmark; in this report, the view on China's coal sector is Cautious.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Coking coal

  Supply constrained, with relatively strong price resilience

  Strengths

  Production resumptions in Shanxi are progressing slowly, safety inspections have caused mine shutdowns in multiple areas, sample output has declined, and mine-site inventories are low.

  Weaknesses

  If suspended mines resume production quickly, supply constraints may ease.

  Comparison

  Compared with thermal coal and seaborne coal, domestic coking coal prices are more stable.

  Risks

  Changes in the pace of safety inspections, weaker demand from the steel chain, and volatility in imported coking coal prices.

• Thermal coal

  Prices have pulled back slightly, while some indicators remain stable

  Strengths

  BSPI remained stable, and the decline in QHD 5500 was limited.

  Weaknesses

  CCI 5500 and mine-mouth prices fell, while seaborne NEWC saw a large drop.

  Comparison

  Short-term performance is weaker than domestic coking coal.

  Risks

  Thermal coal demand may fall short of expectations, seaborne coal prices may continue to decline, and rising inventories may pressure prices.

• Covered China coal stocks

  Industry prices and ratings affect related assets

  Strengths

  The coverage list includes China Coal Energy Co., Ltd., China Shenhua Energy, Shaanxi Coal Industry, Shanxi Coking Coal, Yancoal Australia Ltd, Yankuang Energy Group Co Ltd, and Shougang Fushan Resources Group Limited, among others.

  Weaknesses

  This report does not provide new target prices or earnings forecast revisions for individual stocks.

  Comparison

  Companies with higher coking coal exposure may benefit more from the resilience of domestic coking coal prices, while companies with higher thermal coal exposure may be more affected by the thermal coal pullback.

  Risks

  Rating changes, coal price volatility, regulation and production safety policies, and potential conflict-of-interest disclosures.

Key data

• Report date2026-06-29 01:53 PM GMTDate shown on the report cover page.
• QHD 5500 kcal/kgRmb726/t, WoW -0.1%As of June 26, thermal coal prices edged down slightly.
• CCI 5500 kcal/kgRmb851/t, WoW -1.6%Table data show that CCI 5500 pulled back.
• BSPIRmb714/t, WoW 0.0%This thermal-coal-related price indicator remained stable.
• NEWC thermal coalUS$129/ton, WoW -10.4%Seaborne thermal coal prices fell sharply.
• QLD coking coalUS$241/ton, WoW -0.8%Seaborne coking coal saw a slight pullback.
• Liulin No.4 mine-mouth priceRmb865/t, WoW 0.0%Domestic coking coal prices remained stable.
• Liulin No.4 FOR priceRmb2,040/t, WoW 0.0%Domestic coking coal delivered/rail-related prices were unchanged.
• Sample coking coal output4.97mmt, WoW -1.3%Output continued to decline due to Shanxi safety inspections and slow production resumptions.
• LHD inventory6.77mt, WoW +2.6%Inventory increased from the previous week, but was still -2.9% YTD.

Impact & implications

From an investment perspective, coking-coal-related assets are receiving stronger short-term support from supply constraints, especially as slow production resumptions in Shanxi and low mine-site inventories may continue to put a floor under prices. However, the pullback in thermal coal and seaborne coal prices, together with the sector's overall Cautious view, suggests that upside across the coal sector is uneven, and positioning should distinguish between coking coal and thermal coal exposure.

Risks

• Faster-than-expected mine resumptions in Shanxi could weaken coking coal supply constraints and price support.
• Continued declines in thermal coal and seaborne coal prices could weigh on sentiment toward the coal sector.
• Weaker-than-expected demand from the steel industry chain could suppress coking coal demand.
• Changes in regulation, safety inspections, and production policies could alter the supply pace.
• The report discloses that Morgan Stanley has business or holding relationships with some covered companies, so the research conclusions should be used together with the conflict-of-interest disclosures.

What to watch

• The progress of coal mine shutdowns and resumptions in Luliang, Lingshi, Gujiao, Qinyuan, and other areas of Shanxi.
• Whether sample coking coal output continues to stay below around 4.97mmt.
• Changes in mine-site inventories and whether low inventories can continue to support coking coal prices.
• Weekly changes in QHD 5500, CCI 5500, BSPI, NEWC, and QLD coking coal prices.
• Subsequent rating and price updates for covered companies such as China Coal Energy Co., Ltd., China Shenhua Energy, Shaanxi Coal Industry, Shanxi Coking Coal, and Yankuang Energy Group Co Ltd.