Surge in China's Coal Production in September

Increased Coal Production

According to government data, coal production in China experienced a 4.4% increase last month, totaling 414.46 million tons. This is a rise from August's total of 396.55 million tons. The increase in production followed the conclusion of safety inspections in coal-producing regions and the resumption of coal-to-chemicals capacity after maintenance, as reported by Reuters.

Return to Normal Operation

Analysts from Galaxy Futures, a financial services firm based in China, were quoted by Reuters as saying that the capacity utilization rate has gradually increased following the end of maintenance on some coal-based methanol, urea, PVC, and other chemical capacity.

Coal Production Over Nine Months

However, the increase in coal production over the first nine months of the year was only marginal, at 0.6%, amounting to a total of 3.48 billion tons. This output was likely affected by safety investigations that led to a significant reduction in accidents and deaths in coal mines.

Demand for Coal

The primary demand for coal came from the power generation sector and heavy industry, where coal continues to dominate. Coal-power generation in China increased by 8.9% in September on an annual basis, reaching 545.1 billion kWh, according to the state statistics agency.

Increased Coal Imports

China's coal imports also saw an increase in September, totaling 47.59 million metric tons of coal, a 13% increase from September 2023. The rise in imports was largely due to a favorable arbitrage between foreign and domestic supply.

Coal Prices

The Asian benchmark of coal prices, located at Newcastle in Australia, fell for most of last month. The lowest level in September was $136.46 per metric ton on September 23, a 7% decline from the August high of $147.13 per ton, according to estimates by Reuters.

Coal's Role in China's Energy Generation

Coal accounts for approximately 60% of China's generation, despite a surge in hydropower earlier this year due to abundant rainfall, which reduced the share of coal in the country's energy mix. In contrast, natural gas accounts for less than 10% of generation.

Bottom Line

It's clear that coal continues to play a significant role in China's energy generation, despite efforts to diversify the energy mix. The increase in coal production and imports in September highlights the ongoing demand for this resource. What are your thoughts on this trend? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, available every day at 6pm.