China's Coal Production Rises, but the Share of Electricity Falls: Russell
China's coal production is increasing while its share in electricity generation is decreasing. This apparent contradiction will result in lower import volumes and cheaper prices.
The National Bureau of Statistics released data on August 15 showing that the coal output in July was 2.8% higher than the same month one year ago, reaching 390,37 million metric tonnes.
The output in July was lower than June's, which was 405,38 million tons. This was the highest monthly production so far in this year. July's production was the third highest monthly output so far in 2024. The trend has been higher since April.
The increasing availability of coal, in the largest producer, importer, and consumer, has not translated into a higher share of total electricity production, the primary application for the fuel.
The rapid growth of solar and wind power in China is likely to continue this trend.
China's thermal energy generation fell in July, for the third consecutive month compared to a year earlier. This was despite an increase in overall power consumption.
The thermal power output in July, which is mostly coal-fired and only a little natural gas, dropped 4.9% from the same period in 2023, to 574.9 billion Kilowatt-hours.
The total generation increased by 2.5%, to 883.1 billions kWh. Hydropower output jumped 36.2%, to 166.4 billions kWh.
China has experienced a warmer than normal summer. This has increased the demand for electricity to cool.
In 2023, hydropower output increased from a low baseline. This was due to low rainfall.
Solar energy grew by 16.4% and nuclear increased by 4.3% in July.
China is accelerating its renewable energy installations, adding 102 gigawatts of capacity in the first half 2024. This will bring total capacity to over 700 GW.
In the first half of 2024, wind and solar capacity added was almost seven times greater than the 18.3GW of coal-fired power.
MARKET DYNAMICS
As coal production increases, the market for thermal coal in China is likely to change due to the recovery of hydropower, rapid solar rollout, and rising coal production.
Thermal coal prices in China have begun to fall, and the benchmark price at Quinhuangdao is now lower than before. SteelHome consultants estimate that the price of a ton fell to 835 yuan (116.55 dollars) on August 16.
The price of coal has been trending lower since its latest peak of 885 Yuan per ton on 28 May, and it has fallen 11.2% from the peak in 2024 so far of 940 Yuan on 27 February.
Due to the lower price of thermal coal in China, it has been necessary to lower the prices for the fuel imported from Australia and Indonesia, two of the largest exporters and suppliers to China.
In the week ending Aug. 16, Indonesian coal, with an energy content of 4200 kilocalories/kg (kcal/kg), was valued at $51.18 per ton by commodity reporting agency Argus.
The price dropped by 12% from its highest level of this year, $58.17 per ton in the last week before March 8, to the lowest it has been in 11 months.
The price of Australian coal, with a 5,500-kcal/kg energy content, was $86.78 per ton for the seven days ending August 16, down 10.2% compared to its highest level in 2024 at $96.66 for the week of March 1.
Official data shows that imports of all grades have increased 13.3% to 295.78 millions tons in the first seven month of 2024.
Kpler, a commodity analyst, has found that the seaborne imports for thermal coal have begun to decline.
Kpler estimated July seaborne thermal coking coal arrivals to be 28,56 million tons. This is down from 29,38 million in June, and 30,67 million in May.
Kpler estimates thermal coal arrivals at 28,26 million tons for August.
It is likely that the price of seaborne cargoes must drop to remain competitive, as domestic coal production and prices are recovering.
These are the opinions of the columnist, an author for.
(source: Reuters)
