China coal price fluctuates downward amid increasing supply

The speculations in coal market have almost completed. Some regions in China could still get hit by the freeze, but the temperature this winter may not be so low as in last year. After the downward movement in 2023, coal price may keep slightly weak in 2024 within a range lower than that in last year.

In 2023, China coal price fluctuated downward amid ample inventory, with domestic supply maintaining high and imports volume increasing.

According to the data released by National Bureau of Statistics, during Jan-Nov 2023, domestic coal production from enterprises above designated size reached 4.24 billion tons, up 120 million tons or 2.9% from the same period of the year earlier, with daily production over 12 million tons.

In addition, China coal imports also increased. According to the data released by China customs, coal imports reached 47.29 million tons in Dec 2023, up 53.03% on year; and the full-year import volume reached 474 million tons in 2023, up 61.8% on annual basis and hitting record high.

In 2024, China coal supply is expected to remain ample, while supply and demand growth may decelerate.

1. Policy to ensure supply. As the policy to ensure coal supply is becoming a long-term mechanism, China domestic production is expected to keep increasing in 2024. Coal capacity may continue growing, but any potential in the increase in coal mine capacity in Provinces such as Shanxi, Shaanxi and Inner Mongolia would be limited, and the transportation of coal out of Xinjiang is not convenient despite local capacity increase. Therefore, the capacity growth could slow down in 2024.

2. Imported coal. The imports of coal are estimated to maintain high in 2024. Though the tariff on imported coal has recovered since Jan 2024, the arriving of cargoes remains intensive as there's profit in importing coal amid bounteous supply in international market.

3. Demand for coal. China's demand for coal is expected to keep rising but the growth may slow down in 2024. Seasonal demand increment from power plants would be the driving force to coal, however, with the development of hydro and wind power, as well as the power generation from new energy, some consumption of coal at thermal power plants could get substituted. In addition, with the progress of "dual-carbon" strategy, and strict control on coal consumption at new steel capacity and chemical sectors, coal demand growth may decelerate in 2024.

4. Coal mine accident. Recently, an accident occurred at a mine in Henan Province, which had caused casualties, and led to shutdown of coal mine. Any unexpected accident would be a temporary influential factor to coal price, but with safety inspection becoming more targeted, speculations in coal market could decrease and the likelihood of price surge in a short period could reduce in 2024.