Sxcoal Issue 34# | China's thermal coal market in 2024: traditional seasonal factors blur
A new normal has emerged in China's thermal coal market, i.e. neither surges nor plummets as sharply as expected during traditional peak periods.
China's thermal coal market has largely stabilized in 2024. Steady domestic production growth and record-breaking imports against relatively flat consumption has resulted in loose supply-demand dynamics. A new normal has emerged in China, where the market neither surges nor plummets as sharply as expected during traditional peak periods.
Increased supply
Production China's coal output has stayed high so far this year. The country produced 3.89 billion tonnes of raw coal over January-October, up 1.2% from a year ago, showed data from the National Bureau of Statistics.
Year-to-date output returned to growth in September after prolonged year-on-year declines, with further expansion in October. However, the year-on-year growth rate for January-October reached a four-year low.
Shanxi, China's top coal-producing province, experienced heightened pressure on coal production from strict safety inspections, including addressing overcapacity and hidden longwall issues, alongside environmental governance efforts along the Yellow River.
However, this has been offset by the persistent release of advanced capacities in Xinjiang and Inner Mongolia. As operations resume in Shanxi and safety checks normalize, the country's coal output has shifted from negative year-on-year growth to positive figures.
Import China's coal imports have consistently elevated, hitting historical highs in monthly imports from January to October. The September import alone set a new record of 47.59 million tonnes. Except for February, monthly import volumes have all exceeded 40 million tonnes. The whole-year import is anticipated to surpass 510 million tonnes.
Growing thermal coal imports significantly contributed to the overall increase. China imported 336 million tonnes of thermal coal over January-October, 11.13% higher than the year-ago level.
Increased global supply also played a part, particularly after the lifting of the ban on Australian coal imports in early 2023. Australian coal inflows to China reached nearly 58 million tonnes during the first ten months, exceeding annual volumes before the ban. Meanwhile, Mongolian traders have increasingly prioritized thermal coal businesses, leading to a higher proportion of thermal coal in their exports to China.
International thermal coal prices have stabilized so far, with limited fluctuations observed. The competitive seaborne market with sufficient supply limited significant increases in international prices, giving imported coal a pricing advantage over domestic options and boosting demand among Chinese buyers.
Affected by extreme summer heat and the northward subtropical anticyclone entering autumn, southern China experienced prolonged high temperatures. As a result, coal consumption at power plants was significantly higher than the same period in previous years.
Meanwhile, stimulated by favorable macroeconomic policies, the non-power sectors increased on-demand purchases, keeping imported coal arrivals high at Chinese ports.
Moderate demand
China's thermal coal demand has shown a relatively subdued trend. While overall consumption rose compared to 2023, it lagged behind the supply expansion, resulting in a notable supply surplus.
Sxcoal's data showed that the effective supply of thermal coal in China reached 3.15 billion tonnes during the first nine months, rising 2.19% from a year ago. Total demand over the same period grew 2.82% year on year to 3.06 billion tonnes. This indicated a nearly 100 million tonnes of surplus.
China's economy has gradually recovered this year, contributing to an overall stable demand for coal, yet still with fluctuations.
The power sector, traditionally the largest consumer of thermal coal, has experienced a decline in its growth of coal burns. This is partly attributed to higher-than-expected hydropower generation and the rapid adoption of renewable energy sources, which align with the country's broader eco-friendly efforts.
Non-power sectors, such as cement and construction materials, have presented some resilience, benefiting from positive macroeconomic policies and seasonal demand spikes in September and October. However, the chemical industry, especially methanol and urea sectors, has struggled with retreated prices and waned downstream demand, tempering overall demand gains.
As winter approaches, increased heating demand and declining hydropower output, together with the gradual effect of macroeconomic positives, are expected to slightly boost coal demand throughout 2024.
Outlook
As China approaches the final year of its 14th "Five-Year Plan" (2021-2025), there is a cautiously optimistic outlook for the thermal coal market. The expected economic recovery and the implementation of a set of policies are likely to strengthen coal consumption in the metallurgical, construction materials, chemical, and power sectors.
However, questions remain regarding the sustainability of coal imports in maintaining the upward trend, the impact of extreme weather on thermal coal demand, and whether the phenomenon of "not-so-busy peak seasons and not-so-quiet off-seasons" is likely to continue. These issues merit further investigation.
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