Sxcoal Issue 44# | 2024 China thermal coal demand analysis & 2025 forecast
A brief summary of key points from our latest annual report on China's thermal coal market.
China's thermal coal prices will move downwards amid weak fundamentals and loose supply in 2025. The average price level for CCI 5500 index is forecast to be 781 yuan/t, down 81 yuan/t from 2024.
Thermal coal supply in China is estimated to 3.89 billion tonnes (Bt) in 2024, marking a year-on-year increase of 1.9%. China's raw coal production is expected to be 4.8 Bt in 2025, as Shanxi-based mine operations return to normalcy, and major production areas like Xinjiang, Inner Mongolia and Shaanxi maintain stable production and supply, with thermal coal supply forecast to up 0.9% YoY to 3.93 Bt.
2025 marks the final year of the 14th "Five-Year Plan" period. With higher targets of energy conservation and carbon reduction, thermal coal demand growth may decline, with total demand anticipated to rise 1.7% YoY to 4.24 Bt.
As domestic supply in 2025 poised to increase, coal stocks will also be high at all links, weakening China's dependence on imported cargoes. In 2025, China's coal imports are forecast to fall 3.7% YoY to 520 million tonnes (Mt), with thermal coal at 410 Mt, down 3.1%.
In 2024, thermal coal prices moved downwards, and hit a new low around the end-year. In 2025, thermal coal fundamentals will remain weak amid sufficient supplies, and coal prices will further drop. The average CCI 5500 index in 2025 is estimated to be 781 yuan/t, falling 81 yuan/t from 2024.
China's spot coal supply is expected to further loosen in 2025 alongside improving economic structure, and the government may put a cap over approvals of new production capacity. Coal enterprises are asset heavy and in face of high debts. They would be more cautious in FAI in this industry. The industry outlook remains weak given pressured profitability.
DEMAND & FORECAST
With higher targets of energy conservation and carbon reduction, thermal coal demand growth may decline, with total thermal coal demand anticipated to up 1.7% only to 4.24 Bt in 2025.
Power industry
China's newly-installed solar power generating capacity in 2024 was mainly in northwestern and eastern China, with combined capacity as of November 2024 reaching 820 GW, jumping 46.8% on the year and accounting for 25.3% of the total, 5.8 percentage points higher than a year ago.
The share of thermal power generation in China's overall power system decreased in 2024, although its dominant position remained unchanged. Hydropower generation surged 20.8% in April-September 2024 thanks to relatively rich rainfall in southwestern China. By end-September, precipitation started reducing and hydropower output also declined on a yearly basis; most hydropower stations started filling their reserviors, with low levels of water release. Wind and solar power generation increased rapidly thanks to swift expansion of production capacity, while solar power capacity also increased.
In 2025, China's economy will strive to maintain stable, and electricity consumption will continue to increase. With rapid growth in non-fossil installed capacity, the proportion of thermal power generation is forecast to decline slightly.
It is expected that the thermal power generation will reach 6,500 TWh by 2025, rising 2.3% YoY. The power industry is anticipated to consume 2.71 Bt of thermal coal in 2025, a YoY increase of 2.4%.
Steel industry
In 2025, the Chinese economy will face growth pressures, and reduced profits will deter steel mills from restarting production. China's crude steel and pig iron production are also estimated to fall on a YoY basis, and thermal coal consumption in the steel industry is forecast to reduce 3% YoY to 170 Mt in 2025.
Building materials industry
Cement industry off-peak production and China's carbon peaking goals have led high coal-consuming building materials enterprises to increase production cuts, resulting in a larger decline in overall coal consumption than in cement production. Thermal coal consumption in this industry in 2025 is expected to fall 6.6% to 250 Mt.
Chemical industry
Given carbon peaking target, the expansion of production capacity for coal-to-methanol and synthetic ammonia has slowed down, while capacity utilization has steadily increased, resulting in a narrowed growth of coal consumption of the traditional chemical industry. Affected by oil price declines, coal consumption growth in new chemical industry has also narrowed. Thermal coal consumption in the chemical industry in 2025 is anticipated to rise 4.4% YoY to 300 Mt.
Heating and other industries
China is projected to consume 380 Mt of coal in 2025 to generate heat, rising 4.8% from a year ago. The continued control of scattered coal has suppressed coal consumption of other industries, and the YoY growth rate will decrease to 0.5%, with total consumption at 440 Mt.
SUPPLY & FORECAST
China's coal capacity expansion in 2025 is expected to slow down. Official requirements for signing long-term coal supply contracts also eased. This could result in lower contracted volume, which, combined with quite high coal imports, may lead to narrowed production growth of approximately 0.8%, totaling 4.8 Bt in 2025. Of this, thermal coal supply would reach 3.93 Bt, up 0.9%.
In 2024, inventory pressure at coal mines was quite small, while stockpiles at transfer ports elevated. In mid-to-late December 2024, Sxcoal's tracking data showed coal stocks at surveyed mines increased 6.3% YoY to 3.47 Mt, and coal inventories at northern ports ticked up 0.1% YoY to 26.55 Mt.
In late December, the combined inventory at eight coastal provinces totaled 35.15 Mt, an increase of 5.9% YoY. Power plants maintained high coal stocks throughout 2024, capping procurement demand during the peak season.
China's total coal imports are anticipated to remain above 500 Mt in 2025. However, domestic coal prices are expected to decline further, narrowing the price edge of imported coal. Coupled with abundant domestic supply, China's coal imports may fall 3.7% YoY to 520 Mt in 2025, with thermal coal imports down 3.1% YoY to 410 Mt.
PRICE & FORECAST
In 2024, price gap between domestic and imported coal narrowed, as domestic coal prices gradually return to rational range. The imported coal held a price edge for a long time. The price gap of 5,000 Kcal/kg NAR thermal coal at Guangzhou port ranged from -6 yuan/t to 82 yuan/t.
In 2025, China's thermal coal prices will move downwards amid weak fundamentals and loose supply. The average price level for CCI 5500 index is forecast to be 781 yuan/t, down 81 yuan/t from 2024.
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