Shanxi coking coal supply remains tight, limiting downside for prices

Overview

In this issue of its China coal weekly, Morgan Stanley notes that thermal coal prices remained resilient week over week, seaborne coal prices were broadly flat, while domestic and Australian coking coal prices edged lower. The key variable behind price performance is Shanxi safety inspections: many coking coal mines in Changzhi, Taiyuan, Jinzhong, Lüliang, and Linfen remain suspended, and capacity utilization at some mines that have resumed production also remains low, so coking coal supply has not yet returned to normal.

Core views

First, key thermal coal price indicators were broadly stable, showing that the market remains resilient in the short term. Second, spot coking coal prices diverged somewhat, with domestic Liulin pithead prices and QLD prices falling slightly, while FOR prices remained unchanged. Third, 57 coking coal mines in Shanxi are still suspended, involving about 60.4 million tons of annual capacity; although the scale of suspended capacity declined from the previous week, low-load resumptions mean effective supply recovery is limited. Fourth, tight supply is expected to support coking coal prices and limit further downside.

Analysis framework

The report uses a combination of weekly price tracking and supply event analysis: it compares week-over-week changes in benchmark prices for domestic thermal coal, domestic coking coal, and international seaborne coal, while tracking Shanxi safety inspections, the number of suspended mines, affected capacity, and utilization rates after production resumption to assess the short-term impact of supply constraints on coal prices. The report does not provide a complete supply-demand balance sheet, earnings forecasts, or valuation model.

Methodology notes

• Market price trackingWeekly coal price monitoring

  Identify the relative strength of thermal coal and coking coal markets through week-over-week changes in multiple domestic and overseas coal price benchmarks.

  The report covers indicators such as QHD 5500, BSPI, CCI 5500, Shanxi Datong pithead price, Liulin No. 4 pithead price, FOR, QLD, and NEWC to compare price performance across different products and markets.

• Supply-demand fundamentals analysisSupply constraint analysis

  Assess the extent of effective supply recovery using the number of suspended mines, affected capacity, and utilization rates after production resumption.

  Even if suspended capacity declines week over week, mines that have resumed production may still fail to quickly generate effective supply due to low utilization rates; therefore, nominal resumption does not equal a full supply recovery.

• Event-driven analysisAssessment of safety inspection impact

  Assess the short-term transmission of safety inspections to Shanxi coking coal production and prices.

  Safety inspections have led to mine suspensions in multiple cities, which is the main basis for this issue's view that coking coal supply remains tight and price downside is limited.

Asset mapping & comparison

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

• Coking coal

  Shanxi safety inspections and low-load production resumptions directly limit effective supply, supporting prices.

  Strengths

  The number of suspended mines remains high, the capacity involved is large, and short-term supply elasticity is limited.

  Weaknesses

  Domestic Liulin pithead prices and QLD prices still saw slight declines during the week, indicating that price support has not translated into broad-based increases.

  Comparison

  Compared with thermal coal, coking coal prices are more volatile, but its supply constraints are also more prominent.

  Risks

  An early end to safety inspections, rapid full-load production resumptions at mines, or weaker steel demand could all weaken price support.

• Thermal coal

  Major domestic price indicators and NEWC seaborne coal prices were broadly stable, reflecting short-term market resilience.

  Strengths

  QHD 5500, BSPI, and Shanxi Datong pithead prices remained stable, while CCI 5500 rose slightly.

  Weaknesses

  Prices were mostly flat during the week, lacking clear sustained upward momentum.

  Comparison

  Thermal coal price performance was more stable than coking coal, but the report did not identify a significant new supply shock corresponding to it.

  Risks

  Weaker end demand, rising inventories, or stronger competition from imported coal could put pressure on prices.

• China coal stocks

  Coal price resilience and tight coking coal supply can provide fundamental support for earnings expectations of related companies.

  Strengths

  Companies with high-quality coking coal resources or higher sensitivity to spot prices may benefit more from tight supply.

  Weaknesses

  The report does not provide company-level earnings forecasts, target price updates, or unified rating adjustments.

  Comparison

  Companies with higher coking coal exposure may be more sensitive to this issue's supply constraints than pure thermal coal companies, but the actual impact needs to be assessed together with each company's production volume and sales structure.

  Risks

  Falling coal prices, faster-than-expected production resumptions, weak demand, production safety incidents, and policy changes could all affect valuations and earnings.

Key data

• QHD 5500 thermal coalRMB725/tonAs of July 31, 2026, flat week over week.
• BSPI thermal coalRMB715/tonFlat week over week.
• CCI 5500 thermal coalRMB828/tonUp 0.1% week over week.
• Shanxi Datong 5800 pithead priceRMB711/tonFlat week over week.
• Liulin No. 4 coking coal pithead priceRMB845/tonDown 0.6% week over week.
• FOR coking coal priceRMB2,010/tonFlat week over week.
• QLD coking coal priceUSD227/tonDown 1.3% week over week.
• Suspended coking coal mines in Shanxi57 minesDistributed across five cities: Changzhi, Taiyuan, Jinzhong, Lüliang, and Linfen.
• Capacity involved in suspended coal minesAbout 60.4 million tons/yearSuspended capacity declined 16.7% from the previous week, but mines that have resumed production are still operating at relatively low utilization rates.
• NEWC seaborne coal priceBasically flat week over weekInternational seaborne thermal coal prices showed no obvious change.

Impact & implications

The slow recovery of effective coking coal supply in Shanxi is favorable for coking coal prices to receive short-term support from costs and the supply side, and may improve the pricing environment for companies with coking coal resources. Stable thermal coal prices also help maintain industry earnings expectations. However, the report does not raise ratings or target prices for specific companies on this basis; stock-level impact still depends on coal type mix, production area distribution, production recovery, costs, and sensitivity to spot prices.

Risks

• A weakening of Shanxi safety inspections or faster-than-expected production resumptions at suspended mines could drive a rapid recovery in supply.
• If capacity utilization at mines that have resumed production rises significantly, the current effective supply constraint may be weakened.
• Weaker demand from steel, coking, and other end markets could offset the support to coking coal prices from tighter supply.
• Falling import coal and international seaborne coal prices could increase pressure on domestic coal prices.
• Weekly price and suspended capacity data may be revised, and the report does not provide a complete supply-demand balance or valuation calculations.
• Morgan Stanley discloses relationships with some covered companies, including shareholding, investment banking services, or market making; investors should use this report as only one factor in their decision-making.

What to watch

• The production resumption progress and actual capacity utilization of the 57 suspended coking coal mines in Shanxi.
• Whether the scale of suspended capacity can continue to decline, and whether nominal resumed capacity can translate into effective output.
• Subsequent divergence among the Liulin No. 4 pithead price, FOR price, and QLD price.
• Whether thermal coal indicators such as QHD 5500, BSPI, CCI 5500, and NEWC can continue to remain resilient.
• Changes in safety inspection policies and feedback from downstream demand such as steel and coking on coking coal prices.
• Whether subsequent company research includes earnings forecast, rating, or target price adjustments.