Coal sector experiences a major surge, with China Coal Energy, a trillion-dollar giant, hitting an 18-year high

Southern Finance All Media Group Li Yiwen

On March 12, the A-share coal sector continued to rise and expand further, with leading stock China Coal Energy hitting the daily limit and reaching a new high not seen since February 2008. At midday, China Coal Energy was trading at 19.66 yuan per share, up 9.77%, with a total market capitalization of 234.2 billion yuan. Meanwhile, Zhengzhou Coal & Electricity, Yankuang Energy, and Jinneng Technology also hit the daily limit, with stocks like Lu’an Environmental Energy and Dayou Energy rising over 4%.

In the news, the crisis over navigation through the Strait of Hormuz continues to escalate. According to CCTV News, early on the 12th local time, officials at Iraq’s southern ports reported that two foreign oil tankers were attacked and set on fire within Iraqi territorial waters. The attack occurred at Umm Qasr Port, located on the western coast of Zubayr Bay, about 50 kilometers south of the southern port city of Basra. Preliminary investigations suggest that a speedboat carrying explosives launched the attack on the tankers.

Saad Ma’an, head of the security media center under Iraq’s Joint Operations Command, confirmed in a statement early on the 12th that the attack resulted in one death and that 38 crew members had been rescued. The statement said that the Iraqi government deployed six ships to rescue the attacked crew, and search and rescue operations for the missing are ongoing. The attack on the two tankers infringed on Iraq’s sovereignty.

According to CCTV News, on March 11, multiple drones attacked the Port of Salalah in southern Oman in the afternoon. Some drones were shot down, but others hit fuel tanks inside the port.

Amid escalating tensions, the International Energy Agency (IEA) announced on the evening of March 11 that 32 member countries had unanimously agreed to release 400 million barrels of strategic oil reserves to address the global oil supply tightness caused by U.S. and Israeli military strikes on Iran.

However, this move failed to calm market anxiety. Following the news, both Brent and WTI crude oil prices initially declined but then quickly rebounded. As of 11:13 a.m. on March 12, Brent crude futures had returned above $100 per barrel, with an intraday increase of over 8%. Natasha Kaneva, head of commodities research at JPMorgan, stated in a recent report that unless security in the Strait of Hormuz is guaranteed, all policy tools will have limited impact on oil prices.

The continuous surge in oil prices is transmitting to the coal market through energy substitution effects. Shenwan Hongyuan Securities research report pointed out that there is a significant substitution relationship between crude oil and coal. Rising oil prices will force some power generation and industrial users to seek more cost-effective fuels, increasing coal procurement demand. This substitution effect directly lifts coal prices from their lows. Meanwhile, as the global energy pricing anchor, sharp fluctuations in oil prices can influence the entire energy sector through market sentiment, creating an “energy premium” and driving international coal trade prices higher.

Changjiang Securities’ estimates are more specific: if the Strait of Hormuz remains blocked long-term, global coal demand for power generation could increase by 84.86 million tons annually; if China’s coal chemical plants operate at full capacity, this alone could boost domestic coal consumption by nearly 50 million tons.

In addition to demand-side support, supply disruptions also bolster coal prices. CITIC Securities’ research report mentioned that due to ongoing expectations of Indonesia reducing its annual coal production quotas since the beginning of the year, most Indonesian mines have cut back on spot coal exports, leading to tight coal imports in China. Indonesia’s reduction has also driven up Australian coal import prices.

Shanxi Securities pointed out that Indonesia’s supply outlook remains highly uncertain. Coupled with the ongoing Iran-U.S. conflict, the global coal supply and demand may enter a phase of tension, further supporting prices.