Daqin Railway's Slowing Freight Volume and Earnings Decline: A Warning Signal for Coal-Dependent Infrastructure Stocks?

China's coal-dependent infrastructure sector is facing a pivotal crossroads. Daqin Railway (601006), the country's largest coal transporter, has seen its freight volume and profitability erode in recent years, raising questions about the sustainability of its business model. With coal transport accounting for 20.9% of national railroad coal transmission, according to a Futunn analysis, Daqin's performance is a bellwether for the broader industry. This analysis examines whether its struggles reflect a sector-wide downturn and what this means for investors in coal-dependent infrastructure stocks.

A Tale of Two Years: Daqin's Mixed Performance

Daqin's 2024 annual report revealed a -7.1% year-on-year decline in coal transport volume, driven by upstream supply restrictions, competition from imported coal, and shifts in China's energy structure, the Futunn analysis noted. Total operating income fell by -7.89% to 74.627 billion yuan, while net profit plummeted by -24.23% to 9.039 billion yuan, the same analysis reported. However, the company's third-quarter 2025 results showed a glimmer of hope: freight volume on its core Daqin Line rose 3.9% year-on-year to 97.14 million tons, fueled by domestic economic recovery and hot-weather-driven power demand, as reported in a Futunn post. For the first nine months of 2025, though, cumulative freight volume still lagged by 0.2%, the Futunn post added.

This partial rebound highlights the sector's fragility. While short-term demand spikes can temporarily offset declines, structural challenges-such as China's push for renewables and coal import competition-remain entrenched.

Sector-Wide Pressures: Coal's Decline and Infrastructure Strains

Daqin's struggles are not isolated. China's coal transportation infrastructure sector has faced declining coal prices, competition from imported coal, and a shift toward cleaner energy sources, according to an IBISWorld report. Despite a projected 0.9% annualized revenue growth through 2029, the IBISWorld analysis notes the industry is undergoing structural changes, including government incentives for smaller players to exit and increased consolidation among larger firms.

Globally, coal infrastructure projects are also under strain. In India, ambitious plans to transport an additional 400 million tonnes of coal by rail risk overburdening networks already strained by congestion and maintenance backlogs, according to an IEEFA analysis. Meanwhile, U.S. coal demand is expected to decline by 2026 as renewables and natural gas displace coal in electricity generation, a trend discussed in a Nasdaq article. These trends suggest that coal-dependent infrastructure stocks, including Daqin, face a challenging near-term outlook.

Operational Sustainability: Can Coal Infrastructure Adapt?

Operational resilience in coal-dependent infrastructure hinges on cost management, efficiency, and debt levels. Daqin's 2025 Q3 results showed improved revenue (CNY 57.06 billion for nine months) but a sharp drop in net income to CNY 6.22 billion, underscoring margin pressures, per a MarketScreener release. Sector-wide, companies are grappling with volatile coal prices and regulatory shifts. For example, China's Belt and Road Initiative (BRI) has injected USD 1.58 billion into coal-related infrastructure in 2025 H1, according to a GreenFDC report, but such investments may not offset long-term demand declines.

The sector's future may depend on its ability to pivot toward cleaner technologies. China's coal transportation market is projected to grow as part of its energy transition strategy, with low-utilization coal plants serving as transitional buffers for renewables, an idea argued in an EvcurveFuturist article. However, this approach risks locking in infrastructure that could become obsolete as renewables scale.

The Investment Implications

For investors, Daqin's performance signals a sector in transition. While short-term demand fluctuations and policy-driven infrastructure projects may provide temporary relief, the long-term outlook for coal-dependent infrastructure stocks remains clouded. The Zacks Coal industry's outperformance in 2025-gaining 22.7% versus the S&P 500's 4.2% decline-was highlighted in the Nasdaq article, suggesting niche opportunities, particularly in metallurgical coal for steel production. However, broader coal stocks are likely to face headwinds as renewables and natural gas gain ground.

Daqin's ability to adapt will depend on its capacity to diversify revenue streams, optimize costs, and align with China's decarbonization goals. For now, the company's mixed performance serves as a cautionary tale: coal-dependent infrastructure stocks may offer short-term resilience but lack the long-term sustainability to justify high-risk investments.