Coal Prices in China Could Fall Even Further

Oversupply is set to extend an already sizable decline in coal prices in China, which could boost demand, based on a Bloomberg report that noted ample inventories were weighing on prices.

Citing data from the China Coal Transportation and Distribution Association, Bloomberg reported that coal stocks were near record highs and prices would be subjected to further pressure. “There’s no bright spot, prices may test new lows in coming months,” one local analyst said.

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The report follows a prediction from Morgan Stanley that China could impose import restrictions on coal if prices fall too much. The prediction was made at the start of the month, with the bank’s analysts saying that while China is unlikely to resort to outright bans due to its obligations under the World Trade Organization rules, the country could discourage imports by delaying them or boosting inspections.

The oversupply follows energetic coal buying in the second half of last year and lower consumption. Indeed, China itself recorded the weakest growth in thermal power generation last year, at 1.5%. However, even with this weak growth rate, thermal generation—dominated by coal—hit a record high in 2024, at 6.34 trillion kWh.

The persistent growth in Chinese coal demand, including for power generation, goes to show that coal remains the baseload of China’s power system to back up the surge in wind and solar, and will stay this way for years to come as power demand jumps with the increasing electrification of homes and transport.

In the short term, however, coal and gas generation in China declined over the first two months of the year for only the third time in 35 years, Bloomberg noted in an earlier report. The decline was not the result of more generation from wind and solar. It was the result of warmer weather that affected demand for heating.

By Charles Kennedy for Oilprice.com

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