The weather trending topics over the past two weeks have been dominated by reports of extreme climate events.

Southern China's Guangdong and Guangxi regions have been hit by the most severe "Dragon Boat Water" rainfall in recent years, with consecutive days of torrential downpours causing urban flooding and submerged farmland in many areas. Meanwhile, temperatures in numerous parts of North and Northeast China surged past 38°C ahead of schedule, with over a dozen weather stations setting new high-temperature records for May.

Southern floods and northern heatwaves are unfolding simultaneously. This summer is starting off on an unusual note from the very beginning.

Experts from the Institute of Atmospheric Physics at the Chinese Academy of Sciences point out that the probability of a moderate-strength El Niño event occurring this year exceeds 70%. Further research suggests warming in the tropical Pacific could push this event to extreme intensity, a pattern of extreme climate that may persist until early 2027.

El Niño refers to a climatic phenomenon characterized by abnormally warm sea surface temperatures in the central and eastern equatorial Pacific and associated atmospheric circulation adjustments. It manifests as a periodic rise in global average temperatures and mismatched patterns of drought and flood. According to forecasts from the China Meteorological Administration, temperatures across most of China this summer are likely to be higher than the seasonal average. There is a high probability of periodic heatwaves in North, East, Central, and South China, as well as the eastern Southwest region and Xinjiang.

The World Meteorological Organization has issued a longer-term warning: there is an 86% chance of a new global hottest year occurring between 2026 and 2030. Sustained warming is no longer just a singular environmental issue but a real variable closely linked to everyone's daily life.

El Niño's Impact Since 2000

Extreme Weather Disrupts Energy Supply, Power System Faces Major Test

Extreme weather is first impacting China's power system.

Calculations by the National Development and Reform Commission indicate that the national peak power load this summer will reach 1.6 billion kilowatts, an increase of 90 million kilowatts year-on-year—equivalent to the entire power consumption scale of Henan Province.

High temperatures are driving a surge in residential air conditioning electricity use, keeping demand robust.

Meanwhile, droughts brought by El Niño are directly suppressing hydropower output in the Yangtze River basin. Wind and solar power generation are also being disrupted by extreme rainfall and persistent heat, leading to a significant decline in output stability, tightening the power supply side simultaneously.

With pressure from both supply and demand, thermal power is ultimately shouldering the critical responsibility of ensuring grid stability and power supply.

Thermal power generation is highly dependent on thermal coal. Increased grid support efforts will directly push up coal consumption, providing strong support for coal prices. Data estimates show that for each additional week of extreme high temperatures, the price of 5,500 kcal thermal coal at Qinhuangdao port rises by approximately 43 yuan per ton.

This is compounded by the year-round, uninterrupted power consumption of AI computing centers, creating a long-term, new, and rigid demand for industrial electricity, resulting in a dual increment for coal demand.

Supply and Demand Tighten, Coal Charts Its Own Course

As the contradiction between power supply and demand transmits upstream, the supply-demand balance in the coal market is continuously tightening.

From the supply side, the room for increasing domestic coal production has essentially peaked.

Shanxi, as a core domestic coal-producing region, has normalized safety production rectification campaigns, with many mines suspending operations for self-inspection. The model of exceeding production quotas to ensure supply has become a thing of the past. Even with rising coal prices, the short-term space for releasing new capacity remains limited.

Overseas supplementary channels are also contracting: Indonesia has reduced its coal export quotas and raised export tariffs, leading to a year-on-year decline in imports to China. With the price differential between domestic and imported coal inverted, coastal power plants' willingness to purchase imported coal continues to weaken.

On the demand side, dual catalysts are emerging.

In the short term, there is residential cooling electricity demand driven by El Niño's prolonged high temperatures; the peak summer period from June to September is the annual peak for electricity consumption. In the medium to long term, there is stable industrial electricity demand growth driven by the continuous expansion of computing infrastructure.

Beyond this, the rigid demand from steel and coal chemical industries continues to underpin coal consumption. In a high oil price environment, the cost advantage of coal chemical processes becomes prominent, driving steady growth in non-power coal demand.

Inventory data at ports and power plants is also providing early validation of the market's strength.

Current coal inventories at the six major power plants are 1.35 million tons lower year-on-year, and inventories at major ports are at their lowest level in nearly five years for the same period.

Before the peak high temperatures arrive in July and August, the concentrated inventory replenishment cycle for power plants has just begun, providing ample support for spot coal prices.

Setting aside short-term seasonal trends, from a historical performance perspective in capital markets, the coal sector offers another layer of unique allocation value: high dividend yield plus low valuation.

Taking the CSI Coal Index as an example, as of June 22, 2026, the index's dividend yield (trailing 12 months) is as high as 4.72%. This high-dividend attribute gives coal assets an irreplaceable buffering role as a core holding.

Furthermore, the CSI Coal Index's price-to-book ratio is only 1.81 times, indicating a relatively low valuation level. As deposit yields continue to decline, its allocation value becomes more prominent.

Leveraging Index Tools to Capture the Coal Market Trend

After understanding the industry's growth logic driven by climate factors, many investors might directly choose individual stocks for exposure. However, individual stock investment inherently carries multiple hard-to-avoid implicit risks.

First is the issue of fragmented performance within subsectors. The coal sector does not move uniformly; the drivers for thermal coal, coking coal, and coal chemicals are entirely different. A single stock can hardly cover two major growth themes simultaneously, making it easy to miss out on specific subsector rallies.

Secondly, the screening threshold for individual coal stocks is not low. Coal companies differ significantly in terms of reserves, long-term contract ratios, and dividend policies, making it difficult for average investors to continuously track high-frequency data on capacity, inventory, and coal prices.

Therefore, for investors seeking to fully capture the coal cycle红利 catalyzed by this round of extreme climate, a diversified industry index tool might be a more suitable approach.

Take the CSI Coal Index, tracked by the Coal ETF Guotai (515220), as an example. The index selects 30 core coal companies from the Shanghai and Shenzhen markets, comprehensively covering the entire industry chain from coal mining, washing, and processing to coking. It objectively reflects the overall operational trends of the entire coal industry.

The index's top ten holdings include a group of industry leaders. The product's holdings are purely focused on the core coal business, without unrelated sector activities diluting returns, allowing it to more precisely track the overall movement of the coal industry and avoid individual company "black swan" risks.

Coal ETF Guotai (515220) is currently the only coal ETF in the market, making it a prime choice for investors looking to gain exposure to the coal sector. As of June 22, 2026, the fund's size has reached 13.3 billion yuan. The continuous inflow of funds confirms market consensus on the allocation value of the coal sector. Moreover, the product offers ample on-exchange trading liquidity, making buying, selling, and creation/redemption operations very flexible, suitable for both institutional long-term core holdings and individual investor positioning.

Taking a longer-term view, global warming is increasing the frequency of extreme climate events, while the instability issue of green power remains unresolved. Thermal power's role as the backstop for power supply is unlikely to change in the long term, meaning coal still possesses significant allocation value.

If investors are bullish on the long-term value of coal, after assessing their own risk tolerance, they might consider gaining exposure through a coal ETF. This approach can balance short-term potential gains with long-term defensive characteristics, capturing the确定性 cycle主线 catalyzed by climate factors.

Market views change with market conditions and do not constitute any investment advice or promise. Indices mentioned are for reference only and do not constitute any investment advice or guarantee of future fund performance. The mentioned funds are equity funds, whose expected returns and risk levels are theoretically higher than those of hybrid funds, bond funds, and money market funds. The mentioned ETF is an index fund primarily employing a full replication strategy to track its target index; its risk-return characteristics are similar to those of the market portfolio represented by the target index. The mentioned ETF feeder fund's target ETF is an equity index fund, whose expected returns and risk levels are theoretically higher than those of hybrid funds, bond funds, and money market funds. This feeder fund mainly invests in the target ETF to track the performance of the underlying index, exhibiting risk-return characteristics similar to the underlying index and the securities market it represents. Please read the fund's legal documents such as the Fund Contract and Prospectus carefully before purchasing any fund product, and choose products that match your risk tolerance. Funds carry risks, and investment requires caution.