Chinese coal importers are preparing to reduce shipments after experiencing significant financial losses this year. According to the China Coal Transportation and Distribution Association (CCTD), buyers are negotiating with international miners to secure fewer long-term contracts for 2025. They have reported losses from importing thermal coal, which is primarily used by power plants. This includes shipments from major suppliers such as Indonesia, Russia, Australia, and even Colombia.
The increase in domestic coal production and imports has led to an oversupply in China, making it difficult to sell the excess coal in a weak economy. Despite a rise in demand for air conditioning during the summer and the upcoming winter heating season, prices have remained largely stagnant for months. Economic uncertainties, particularly related to the U.S. election and potential trade conflicts with a new Trump administration, are causing additional concerns for importers.
CCTD analyst Li Xuegang stated, “We don’t see much fundamental improvement to support prices rising next year.” However, the association did note potential risks that could lead to price increases, such as the Chinese government’s recent efforts to stimulate the economy.
Weather patterns are also unpredictable, with La Niña conditions possibly leading to cold fronts that could push prices up to 900 yuan ($126) per ton, from the current level of around 850 yuan. The duration of any price increase will depend on how long the cold weather lasts, according to Li.
Additionally, the production of hydropower, an important alternative to coal, has decreased sharply in September after a summer of heavy rains had previously supported continuous growth for 11 months.
While coal stockpiles in China are abundant, the inventory at coastal power plants is still below the peaks seen last November. This indicates that utilities may seek to replenish their supplies, although adverse weather conditions could complicate these efforts. “Landlocked mining provinces are likely to slow coal shipments to prioritize local needs,” Li added.
Other analysts anticipate a decline in China’s coal imports in 2025. The consultancy Fenwei Energy Information Service Co. predicts a 4% decrease year-on-year, estimating imports will drop to 490 million tons, according to analyst Amy Xu.
Market Outlook
Recent weeks have seen markets react positively to China’s growth forecasts, following announcements of monetary and fiscal stimulus from policymakers. However, Goldman Sachs Group Inc. warns that there may be signs of an overshoot in these predictions.
The upcoming National People’s Congress meeting, expected in the second half of October, is becoming a focal point for potential significant fiscal spending, although Bloomberg Economics does not foresee additional stimulus for the remainder of the year.
As time runs out for China to address challenges in a key market, a looming tariff on Chinese electric vehicles exported to the European Union will take effect on October 31. These tariffs will range from 7.8% to 35.3%.
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