China’s Growing Domestic Supply Puts Pressure on Coal Prices

The coal market decline continues as China's coal demand weakens and global trade tensions escalate. Over the past week, thermal coal prices have seen fluctuations but remain on a downward trend.

According to Refinitiv data, coal prices fell to $102.75 per ton on Friday, down from $106.2 per ton the previous day. The decline is largely driven by China's record domestic coal production and high import volumes, which analysts predict will continue for several months, further straining the global market.

Mongolia has announced plans to increase coal exports to China by 20% this year, further threatening Australia's coal market share. Meanwhile, major mining company Glencore Plc is reportedly considering production cuts as coal prices approach their lowest levels in a decade.

US-China Trade War Reshapes the Global Coal Supply Chain

The US-China trade war is also affecting coal trade dynamics. Amid rising tariffs, China is shifting toward tariff-free coal suppliers, while the US redirects coal exports to India.

In 2024, US coking coal exports to China surged by 33%, reaching $1.84 billion. However, with escalating tariffs, trade patterns are expected to shift. As a result, Canada and Australia could emerge as alternative suppliers, with Australia potentially regaining its lost market share after recent tensions with China.

Oversupply and Energy Transition Impact Coal Market Outlook

Despite potential production cuts by Glencore, the global coal market remains oversupplied. China plans to increase domestic coal output by 1.5% to 4.82 billion tons by 2025 after reaching record production levels in 2024.

Additionally, countries like Vietnam are accelerating their energy transition from coal to clean energy, further dampening global coal demand. Analysts warn that the market will continue to face headwinds, with thermal coal prices potentially testing new lows.

Conclusion

The coal market decline is driven by a combination of China's rising domestic production, the US-China trade war, and a global shift to renewable energy. While some mining companies consider production cuts, the overall outlook remains bearish due to oversupply and weakening global demand.

Market participants will closely monitor China's policies, geopolitical tensions, and energy transition strategies to assess future coal price trends in the coming months.