Since April, national coal production has declined, easing the imbalance between supply and demand in the market. However, the underlying contradictions—insufficient coal demand and overcapacity—remain unresolved. As a result, industry profits have plummeted, enterprises are facing severe funding constraints, and operational difficulties persist.
    1. Consumption continues to decline.
Building on the declines of 2.9% in 2014 and 3.7% in 2015, national coal consumption for the first half of this year was estimated at 1.81 billion tons, a decrease of 88 million tons, or 4.6%, compared to the same period last year. Specifically: the power industry consumed 880 million tons of coal, down 5.8%; the steel industry consumed 310 million tons, down 4.6%; the building materials industry consumed 240 million tons, up 0.4%; the chemical industry consumed 130 million tons, up 6%; and other industries consumed 250 million tons, down 9.9%.
    2. Production has been declining continuously.
In the first half of the year, the raw coal output of China's large-scale coal enterprises reached 1.63 billion tons, a decrease of 175 million tons, or 9.7%, compared to the same period last year. Looking at monthly production trends, the declines in April, May, and June were 11%, 15.5%, and 16.6%, respectively, with the rate of decline gradually widening.
     3. Imports rebound sharply
In the first half of the year, China’s coal imports totaled 108.03 million tons, an increase of 81.9 million tons, or 8.2%, compared to the same period last year. Coal exports reached 4.67 million tons, resulting in a net import volume of 103.36 million tons—a rise of 6%. Since May, imports have surged significantly: in May alone, imports amounted to 19.03 million tons, up 33.6% year-on-year; and in June, imports reached 21.75 million tons, representing a 31% increase over the same period last year.
    4. Reduced transshipment volume
In the first half of the year, China’s railways transported 907 million tons of coal, a decrease of 114 million tons, or 11.2% year-on-year (of which 142 million tons were transported in June, down 19.42 million tons, or 12% year-on-year).
Coal shipments from major ports totaled 313 million tons, down 4.9% year-on-year (of which 51.83 million tons were shipped in June, a decrease of 12.1% year-on-year).
    5. Inventory has decreased somewhat.
Since the beginning of this year, inventories at enterprises, power plants, and ports have all experienced a “three-fold decline.” As of the end of June, coal stocks held by coal enterprises totaled 120 million tons, down 112.2 million tons, or 8.6%, from the same period last year, and down 8 million tons, or 6.2%, from the beginning of the year. Key power-generation enterprises held 54.58 million tons of coal, a decrease of 10.83 million tons, or 16.6%, compared to the same period last year, and a drop of 19 million tons, or 25.8%, from the beginning of the year. At major coal-loading ports in northern China, coal inventories have declined significantly: as of July 14, coal stocks at the five ports around the Bohai Sea totaled 11.71 million tons, down 1% from the beginning of the year and down 42.8% year-on-year. Among these, coal stocks at Qinhuangdao Port had fallen to around 3 million tons.
    6. Prices rebounded slightly.    
Since 2012, coal prices nationwide have fallen sharply and continuously; however, since the beginning of this year, they have shown a slight rebound. In major producing regions, the spot price of thermal coal has risen by approximately 60 yuan per ton compared to the beginning of the year. At Qinhuangdao Port, the closing price for 5,500 kcal thermal coal on July 15 stood at 415–425 yuan per ton, up 50 yuan per ton from the start of the year. Coking coal prices have rebounded by roughly 100–150 yuan per ton since April of this year. As of July 15, the futures price for thermal coal was 427 yuan per ton, up 127 yuan per ton from the beginning of the year—a rise of 42.3%; the futures price for coking coal was 742 yuan per ton, up 204 yuan per ton, representing an increase of 38%. Currently, the spot prices of coal across the country have retreated to the level seen during the same period last year, roughly equivalent to the levels observed in 2006.
    7. Investment has明显 decreased.
Fixed-asset investment in the national coal mining and beneficiation industry has been declining continuously since 2013. In the first half of 2016, fixed-asset investment in the coal mining and beneficiation industry totaled 111 billion yuan, a year-on-year decrease of 34.1%, with the decline widening by 21.3 percentage points compared to the same period last year. Of this amount, private investment reached 65.6 billion yuan, down 32.4%.
    8. Profits declined sharply.
In the first five months, the main business revenue of coal enterprises above designated size reached 826.74 billion yuan, down 13.5% year-on-year; profits amounted to 3.5 billion yuan, a decrease of 9.64 billion yuan compared to the same period last year, representing a drop of 73.4%. The proportion of loss-making enterprises remained above 70%. State-owned and state-controlled coal enterprises as a whole reported losses. Among the 90 large enterprises directly reported by the association, losses totaled 4.065 billion yuan, an increase of 3.278 billion yuan compared to the same period last year.
Overall analysis shows that the supply-side structural reform in the coal sector has begun to yield results in the first half of the year. Production has declined at a faster pace than consumption, leading to a reduction in nationwide inventories, a slight rebound in prices, and an improvement in corporate operating conditions. Moreover, accounts receivable collection has shown some improvement—over the first five months, accounts receivable for large-scale coal enterprises fell by 3.5% year-on-year. Nevertheless, the situation remains unstable and the foundation is still fragile. A prominent issue is that the efforts to eliminate excess capacity have not been sufficiently vigorous, and imported coal has surged in the past two months. As a result, downward pressure on the market will persist, and enterprises continue to face significant operational difficulties and severe funding constraints.