Coal sector surges against market trend, Guotai Coal ETF (515220) surges 3%

The global energy market is undergoing a profound restructuring. The ongoing escalation of Middle Eastern geopolitical conflicts is driving up oil and gas prices through three main channels, which in turn are catalyzing increased demand for coal:

1. Direct substitution of oil and gas with coal;
2. Profit recovery in coal chemical industries boosting production loads;
3. Rising global shipping costs increasing imported coal expenses.

With multiple logical factors resonating, the coal sector is shifting from a simple high-dividend defensive asset to a balanced asset with “energy security premium + incremental substitution demand + strengthened cost support.”

On March 23, the Guotai Coal ETF (515220) surged 3% intraday, making it the only relevant market instrument and a core tool to grasp this energy linkage.

【Macro Logic: Geopolitical Conflicts Reshape Global Energy Costs】

The US-Iran conflict continues to intensify, with the Strait of Hormuz effectively blocked. International oil and natural gas prices have surged significantly, raising the global energy cost center. As a result, coal’s value as an alternative energy source becomes more prominent.

Strait of Hormuz Blockade Disrupts Global Supply Chains: On March 17, Iranian Parliament Speaker Kalibaf stated Iran had no intention of blocking the Strait, but due to hostilities, Iran needs to respond. This vital “energy artery,” responsible for about 20% of global oil trade and 83% of Asian LNG supply, is nearly paralyzed. Guosheng Securities notes that the conflict continues to ferment and expand, with international crude oil and LNG prices rising steadily, pushing global coal prices upward.

Source: Platts, Changjiang Securities Research Institute

Global Energy Prices Show Linkage Effects: Since the Middle Eastern situation heated up, prices of oil, gas, and chemical products worldwide have risen across the board, indirectly boosting overseas thermal coal prices. Guotai Haitong Securities analysis indicates that Japan, Korea, and Taiwan have already shown signs of switching to coal, with shipping directions from Australia revealing a trend to抢煤 (grab coal). Short-term global energy switching is underway.

Cost Support Fully Strengthened: Rising fuel costs have caused global shipping rates to soar. Indonesia’s proposal to reintroduce export taxes, if implemented, would increase coal export costs, further elevating actual global coal costs. Guosheng Securities believes that this round of coal price increases may unfold in three stages:

• Stage 1: Indonesia’s production cuts lay the foundation for rising prices;
• Stage 2: The US-Iran conflict triggers demand for coal substitution of oil and gas, reinforcing upward momentum and slope;
• Stage 3: Some coal-producing countries may be forced to reduce or halt production due to diesel shortages, exacerbating supply-demand tensions.

【Industry Logic: Energy Substitution Spurs Three Major Demand Increases】

High oil and gas prices are supporting coal demand through three pathways: coal replacing oil/gas, increased loads in coal chemical industries, and substitution of imported coal, turning the traditionally off-season demand into a real phenomenon.

Pathway 1: Direct Substitution of Oil and Gas by Coal: CICC points out that, under the same heat value, natural gas prices have already significantly exceeded coal prices. The parity point for gas-coal conversion is at a high level, with European natural gas-to-coal ratios approaching historical extremes. Demand for coal-fired power generation substitution is being activated. Changjiang Securities estimates that if the Strait of Hormuz remains blocked long-term, just the demand from coal power alone could annually drive global coal consumption by 84.86 million tons.

Pathway 2: Profit Recovery in Coal Chemicals Boosts Load: Guosheng Securities notes that since early March, following the US-Iran conflict, oil and gas prices have surged. Most domestic chemical contracts (e.g., methanol, propylene, ethylene glycol) have risen over 30% from lows, significantly improving profitability in coal chemical industries. These companies are increasing production loads, supporting demand during off-peak seasons. CICC data shows that current utilization rates for methanol, urea, and ammonia are relatively high, while domestic ethylene glycol capacity utilization is about 65.9%, with room for further growth. If chemical coal demand grows over 10% by 2026, supply and demand could remain tightly balanced.

Pathway 3: Inverted Import Coal Prices Stimulate Domestic Demand: With high import coal prices, the cost advantage of imported over domestic coal diminishes, prompting some terminal and speculative buyers to increase inquiries and procurement, shifting focus to domestic tenders. Guosheng Securities believes that the current import coal price inversion has widened further, with expected declines in import volumes. The seasonally weaker inventory accumulation may be a high-probability event. To hedge future uncertainties, some terminals are preemptively replenishing stocks and turning to domestic procurement, supporting prices and initiating counter-seasonal rises during the off-season.

【Price Logic: Off-Season Not Off, Coal Prices Launch a Challenge to 1,000 Yuan】

Thermal coal prices have ended their correction and are beginning to rise counter-seasonally; main contract prices for coking coal surged overnight, leading domestic commodities. The upward cycle for coal prices has officially started.

Thermal Coal: Off-Season Not Off Becomes Reality: As of March 20, North Port thermal coal closed at 737 yuan/ton, up week-on-week. Guosheng Securities emphasizes that ongoing geopolitical conflicts, shrinking import volumes, and rising chemical demand make the off-season demand for coal increasingly real. The longer the conflict persists, the stronger the upward momentum. They still believe coal prices will challenge the 1,000 yuan mark. Guotai Haitong Securities also notes that the reality of an off-season shortage may lead to earlier summer replenishment.

Coking Coal: Sentiment Spillover and Fundamentals Resonance: On the night of March 20, main contract prices for coking coal jumped 8.7%, leading domestic commodities. Guosheng Securities analysis suggests that this is not solely driven by supply-demand fundamentals of coking coal but also by the ongoing fermentation of geopolitical conflicts, which increase energy costs and promote substitution effects (domestic low-cost replacing overseas high-cost), coal chemical transmission effects (profit surge in coke oven gas derivatives), and the catalytic effect of reverse seasonal rises in thermal coal. Currently, most commodities are in a stage dominated by geopolitical conflicts lifting energy prices, and coking coal is no exception. Until the situation substantially eases, prices are likely to remain high.

Upward Space Estimation: Based on different oil price scenarios, CICC estimates possible ranges for domestic thermal coal prices. In extreme risk scenarios, historical oil-coal price ratios suggest domestic thermal coal could break through 1,000 yuan/ton. Looking back:

• In 2008, with oil at $97/barrel, coal was 1,090 yuan/ton;
• In 2011, with oil at $111/barrel, coal was 857 yuan/ton;
• In 2022, with oil at $101/barrel, coal reached 1,200 yuan/ton.

【Guotai Coal ETF (515220): One-Click Deployment in the Energy Linkage Trend】

The current coal sector is supported by three logical pillars: price elasticity from overseas geopolitical conflicts, incremental demand from energy substitution, and high dividend attributes providing safety margins.

Guotai Coal ETF (515220), tracking the CSI Coal Index, covers thermal coal, coking coal, and integrated coal power companies. It is the only ETF in the A-share market tracking this index. From an allocation perspective, leading coal companies maintain high dividend yields, stable cash flows, and under a declining interest rate environment, resemble utility companies with features of “high profitability, high cash flow, high barriers, high dividends, high safety margins.”

For investors, amid geopolitical conflicts, supply contraction from Indonesia, and rising energy substitution demand, the recovery of the coal sector is highly certain. Investing via Guotai Coal ETF (515220) allows capturing short-term trading opportunities driven by geopolitical tensions and serving as a core holding for long-term high-dividend, high-safety-margin assets.

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