China is experiencing a rapid buildup of coal stockpiles, with inventories reaching over 635 million tons by the end of June, up from below 90 million tons during the 2021 electricity supply crisis. This surge, fueled by increased domestic production and imports, may push coal prices lower during the typical autumn slowdown, affecting miners globally.
The surge stems from China’s response to the 2021 energy crisis, where coal shortages led to power cuts. In response, China boosted coal output by 10% in 2022 and lifted import restrictions, resulting in record stockpiles. Simultaneously, China has accelerated its transition to clean energy, ramping up installations of solar panels, wind turbines, and nuclear plants.
This shift has led to a decline in thermal power generation over the past three months, even as clean-power generation grows to meet rising demand. Despite the oversupply, Chinese officials remain confident in their energy security.
However, the growing coal piles indicate an inevitable price drop, highlighting the rapid pace of China’s energy transition and its impact on global coal markets. As China continues to push towards cleaner energy, the warning is clear: change in the energy landscape can happen swiftly.
Source: Dan Murtaugh, Bloomberg News