China's coal imports hit another record high in the fourth quarter of 2023, and 2024 imports are likely to stay elevated due to slowing domestic production and the price advantage of overseas coal.
The world's largest coal producer and buyer imported 126.79 million metric tons of coal in the fourth quarter of 2023, up 37.2% year over year, data from S&P Global Market Intelligence's Global Trade Analytics Suite (GTAS) showed. China's 2023 coal imports also hit a fresh record of 474.47 MMt, up 61.8% from 2022 and the highest since 2013.
The surge in imports was largely thanks to a continuing price advantage against domestic coal, analysts said. International coal prices have been falling as faltering global economic growth weighs on power demand, and European countries are shifting away from coal thanks to expanding renewables supplies and lower gas prices. Excess international supplies have been flowing into China, where the central government prioritizes energy security and encourages imports through measures such as temporarily waiving coal tariffs and lifting the unofficial ban on Australian coal.
China's coal imports will depend on the price advantage and likely remain high between 450 million and 490 MMt in 2024, according to analysts from the China Coal Transportation and Distribution Association and coal consultancy YiMei.
Metallurgical coal imports from Russia and Mongolia on the rise
In the fourth quarter, China's coal imports from Indonesia, mainly thermal coal, slid 0.5% year over year, but imports from Russia and Mongolia, which comprise mostly metallurgical coal, rose 10.2% and 66.6%, respectively.
China restored coal tariffs in January, but Russian and Mongolian miners are expected to keep selling coking coal at discounted prices to China due to geographic proximity and geopolitical restrictions.
"With expectations that China's coking coal imports from Mongolia will keep rising, particularly on the back of expanding rail infrastructure, it's hard to see China's coking coal imports moving substantially lower in coming years," Vivek Dhar, mining and energy commodities analyst at Commonwealth Bank of Australia, said in a Jan. 24 note, adding that the rise in coking coal imports from Russia is a "structural shift."
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Safety checks slow coal output
China's coal production rose 4.5% to 1.22 billion metric tons in the fourth quarter of 2023, according to data from the National Bureau of Statistics of China. But growth has slowed compared with levels in 2022, when Beijing asked local miners to ramp up production to avoid power shortages.
The country has tightened safety rules on mines since August 2023 after intense mining activities triggered fatal accidents in mining hubs. In November 2023, China's National Mine Safety Administration launched a half-year safety campaign in top producer Shanxi province, which could lower the province's coal output in 2024, CCTD analyst Zhang Yupeng said in a Jan. 24 webinar. Shanxi contributed 29.1% of the country's 2023 coal production. Zhang expects China's coal production growth to decline to 1.1% in 2024.
Peak coal consumption in sight
China's thermal coal power generation rose 7.3% year over year to 1,584 TWh in the fourth quarter of 2023, accounting for nearly 70% of the country's electricity generation.
"The availability of hydropower is a key variable in the short term since coal is used as a substitute when hydro underperforms in China," the International Energy Agency said in December 2023. The agency expects China's coal consumption to fall in 2024 and plateau through 2026. Hydropower output is expected to improve as the El Niño weather pattern replaces the La Niña, and accelerated deployment of solar and wind in China will further slash coal-fired generation, the IEA said.
As China's coal supplies outpace demand, Beijing might shift policy focus to constrain coal consumption in the next two years, Yang Jie, thermal coal analyst at Yimei, said in a Jan. 3 briefing.
"China's coking coal demand though faces structural downside risks tied to easing steel demand and emission reduction objectives that will likely continue to weigh on China's total steel output and boost the appeal of scrap steel usage," Dhar said.
