The phenomenon of "winter coal and summer electricity trading" serves as a well-known strategy among investors in the stock market, especially in relation to the coal sector. Traditionally, the logic follows that as temperatures drop during winter, the demand for heating surges, resulting in a spike in both coal prices and the need for coal. Consequently, investors typically rush to purchase stocks of coal enterprises in anticipation of increasing profits. However, this winter has presented a peculiar twist: the expected rise in coal sector performance has not materialized as anticipated. The crux of the issue lies in the dramatic decline of domestic coal prices observed since the second half of 2024, which have continued to hover at low levels, raising questions as to why prices remain stagnant during what is ordinarily a peak consumption season for coal.

The year 2024 has been tumultuous for coal prices, characterized by significant fluctuations. In August of 2023, prices for thermal coal touched rock bottom before initiating a remarkable rebound at the beginning of 2024, prompting several industry analysts to predict soaring prices that could even reach as high as 1200 yuan per ton. This excitement, however, was soon replaced by disappointment when coal prices plummeted again halfway through the year. The typical winter months failed to regenerate interest or induce a price resurgence for coal, leaving many perplexed.

The sluggishness in coal prices is attributed to several intertwined factors. One of the fundamental drivers of coal prices is the relationship between supply and demand in the market. On the supply side, the consistent release of advanced coal production capabilities has led to substantial increases in coal output. Reports indicate that in the first eleven months of 2024, the national output of raw coal reached 4.32 billion tons, marking a year-on-year growth of 1.2% and the highest historical output for this period. The onset of colder weather typically signals a greater demand for coals, as both households and industries prepare for the winter; however, with coal miners ramping up production to meet presumed high demand, an oversupply has stabilized coal availability across the country.

Another significant element influencing these dynamics is the role of imported coal. Historically, imported coal has played a crucial role in balancing domestic market prices and supply and demand. Presently, the noticeable pricing advantage of imported coal has motivated businesses reliant on coal to increase their import quotas. Data suggests that China’s coal imports soared to 540 million tons in 2024, reflecting a staggering increase of 14.4% and setting a new historical high. The influx of cheaper imported coal has suppressed any significant price jumps for domestic supply, compounding the challenges faced by local coal suppliers during the winter season.

On the demand side, unseasonably warm winter temperatures have further dampened electricity needs, which in turn impacts coal procurement by power plants. Meteorological data from November 2024 indicates that the national average temperature was recorded at 5.1 degrees Celsius, significantly higher than the historical average for that period, representing the warmest November since 1961. Notably, warmer conditions in northern China and northeastern regions have exacerbated this situation, leading to a pronounced slowdown in electricity consumption for residential and certain service industries. As a result, the annual growth rate of electricity consumption saw a deceleration to 2.9%, which declined by 5.2 percentage points from October of the same year. In particular, growth rates in the north and northeast dropped significantly, with metrics revealing negative growth in electricity usage for one area. Such overwhelming supply coupled with lagging demand has resulted in record-high coal inventories.

This prolonged downturn in coal prices has posed substantial challenges for coal enterprises, with reports indicating that out of 26 publicly listed coal companies examined in the first three quarters of 2024, 22 reported year-on-year declines in profitability, with 10 of these suffering profit drops exceeding 40%. Under these mounting pressures, many coal enterprises have lamented the impact of increased imports on their market space, criticizing what they perceive as an excessive influx of foreign coal. However, it is vital to approach this matter with nuance: coal prices are currently operating within a rational range, and while China is indeed a coal giant, its coal reserves have a relatively low extraction ratio of around 40 years, indicating potential resource limitations. The current slump in international coal prices represents a critical opportunity for leveraging these resources effectively. The forthcoming 2025 national energy work conference has explicitly emphasized the need to "stabilize coal imports," providing a clear pathway for addressing these concerns.

For coal enterprises to achieve high-quality development, a mere focus on pricing is inadequate. Compared to other nations, China’s coal industry exhibits low concentration, and there is a notable homogeneity in industrial layouts. Additionally, the quality of non-coal industry developments remains subpar, with many coal enterprises facing significant historical debts and financial burdens. While major firms like Shenhua Group and China Coal Energy have swiftly ascended to become internationally competitive enterprises, many smaller companies grapple with precarious business structures and lack competitive leverage, rendering them vulnerable to significant operational variances. Regions dependent on coal mining facing resource depletion further struggle with transitioning their economic reliance.

In light of the global shift toward greener energy solutions and the necessitated reduction in coal consumption, the coal industry finds itself under pressure to transform and adapt to rapidly evolving demands. In recent years, several forward-thinking coal enterprises have inferred the necessity for proactive transitions. They have initiated strategies to specialize and enhance coal production, optimizing operations while simultaneously transitioning toward more sustainable methods of coal utilization. Furthermore, they are forging paths into new energy exploration by tapping into their resources, fostering integrated strategies around mining operations to develop complementary clean energy industry chains incorporating wind, solar, thermal, and hydrogen power.

The last few years of surging coal prices have endowed coal enterprises with substantial reserves to pivot towards innovation and adaptability. The window for transformation is closing, and coal enterprises must capitalize on this momentum, emerging from the cyclical trap of responding to favorable markets with apathy and to declining ones with helplessness. Establishing clear pathways and timelines for transformation while striving for high-quality development is crucial in these changing times.