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Coal prices in China are expected to face further declines, extending the slump to new lows due to elevated inventories at major transportation hubs. These stockpiles are at near-record-high levels and are more than a third higher than at the same time last year, according to the China Coal Transportation and Distribution Association. This surplus in supply, combined with reduced consumption, is exerting downward pressure on prices, which have already dropped by over 20% in the past year.
Key Insights:
High Inventories: Aggressive coal buying from China and other Asian importers in the fall, coupled with lower consumption in early 2025, has led to high stockpiles. As a result, miners are now facing challenges in finding demand for their coal, forcing them to cut prices in an effort to sell.
Declining Prices: Coal prices have already hit a four-year low, and industry analysts predict that they may fall further in the coming months. Morgan Stanley analysts, including Sara Chan, warned that most Chinese miners could incur losses if spot prices drop below 400 yuan per ton, approximately 40% below current levels.
Impact on Miners: State-owned China Shenhua Energy Co., the country’s largest coal producer, has already reported a drop in profits. The company also slashed its coal division budget and halted foreign coal purchases due to the high stockpiles. Smaller miners, particularly in key coal-producing regions such as Shanxi, are being hit even harder, with some reducing salaries, downsizing, or shutting down operations altogether.
Supply and Demand Imbalance: Power generation from fossil fuel plants fell during January and February 2025, marking just the third decline in the past 35 years during the winter period. This low demand, combined with a surplus of stockpiled coal, is continuing to drag prices down.
As the high inventory situation persists, coal prices are unlikely to recover in the short term, and further price cuts seem inevitable, potentially squeezing profit margins for miners across the country.
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