“Since the beginning of this year, the coal market has remained challenging amid multiple factors—including a slowdown in coal demand, difficulties in absorbing excess capacity, growing challenges in controlling total coal output, and declining international energy prices,” said Dong Yueying, Secretary-General of the China National Coal Transportation and Marketing Association. According to currently available statistical data, the outlook for the coal industry is far from optimistic.

In the first five months, the nation’s raw coal production totaled 1.46 billion tons, down 93.21 million tons, or 6%, year on year. Nationwide coal sales reached 1.32 billion tons, a decrease of 127 million tons, or 8.8%, compared to the same period last year.

　　“In the first five months, the nationwide railway system cumulatively transported 859 million tons of coal, a decrease of 10,300 tons, or 10.6% year-on-year,” said Dong Yueying. “Among them, May saw shipments of 165 million tons, down 25.09 million tons, or 13.2% year-on-year—a decline for nine consecutive months, with the rate of decline widening by 2 percentage points compared to April.”

　　Since the beginning of the year, coal prices have been steadily declining. On June 12, China’s coal price index stood at 131.2 points, down 15.5 points year-on-year, representing a decline of 10.6%. By June 17, the price of 5,500 kcal动力煤 at Qinhuangdao Port had fallen to between 410 and 420 yuan per ton, a decrease of 110 to 120 yuan per ton compared to the beginning of the year—reaching its lowest level in nearly a decade. At the beginning of June, the average price of coking coal had dropped by 80 to 100 yuan per ton compared to the start of the year, representing a decline of around 10%, and a year-on-year drop of approximately 30%.

　　“Currently, domestic coal demand is sluggish, and downstream inventories remain persistently high. As of the end of May, total coal stocks across society have exceeded 300 million tons for 41 consecutive months. At the end of May, coal enterprises held 106 million tons of coal in stock, up 7.2% year-on-year and 22.4% compared to the beginning of the year. Key power plants held 58.84 million tons of coal, down 21.6% year-on-year and 37.8% from the beginning of the year. As of June 9, major northern coastal ports held 23.09 million tons of coal, a decrease of 2.1% from the beginning of the year,” said Dong Yueying.

“The weak demand has directly triggered a downturn in the coal industry. According to estimates, coal consumption across the country for the first five months totaled approximately 1.57 billion tons, down 5% year-on-year. Among these, the power sector consumed 790 million tons of coal, a decrease of 6.3% year-on-year; the steel sector consumed 270 million tons, down 2.1%; the building materials sector consumed 190 million tons, down 8.5%; and the chemical industry consumed 100 million tons, up 9.7% year-on-year,” said Dong Yueying.

　　Dong Yueying believes that China still faces significant pressure from overcapacity in coal production. As of the end of 2014, the country had cumulatively added 3 billion tons of new annual coal production capacity over the past eight years. Due to factors such as assessment mechanisms, funding constraints, and the need to maintain stability in mining areas, some large state-owned coal enterprises have found it difficult to halt or reduce production; indeed, certain enterprises are even increasing their output.

　　“From the perspective of the international market, demand has declined in major coal-importing countries, yet the production capacity of major coal-exporting countries has been increasing significantly year after year, making market competition extremely intense. Coupled with factors such as a sharp drop in international oil prices and fluctuations in currency exchange rates, international coal prices have remained persistently low,” said Dong Yueying.

　　Dong Yueying pointed out that disorderly competition in the domestic market is also a significant factor affecting the development of China's coal industry. In some regions and among certain coal enterprises, illegal and non-compliant construction of production facilities as well as overcapacity production have become particularly prominent. While exacerbating the pressure of overcapacity, these enterprises have adopted strategies such as "compensating for lower prices with higher volumes," "disguised price reductions," and "ratcheting down prices through competitive bidding" to boost sales and seize market share, causing domestic coal prices to repeatedly hit new lows. Moreover, some coal-consuming enterprises, through methods like tendering and internal benchmarking, continue to drive down coal procurement prices, alter delivery and settlement terms, delay payments, and even deliberately default on payments, further intensifying the disorderly nature of the coal market competition.

“Affected by multiple factors—including the slowdown in macroeconomic growth, adjustments to the energy structure, and efforts to tackle air pollution—coal consumption is likely to decline. Due to overcapacity, it’s becoming increasingly difficult to sell coal, putting further downward pressure on prices. Therefore, in the short term, the situation of oversupply in the coal market will be hard to reverse, and downward pressure on the market will remain significant,” said Dong Yueying.

　　From the demand side, the decline in coal demand has become the new normal. Faced with downward economic pressures, the country has strengthened macroeconomic regulation and is making every effort to keep the economy operating within a reasonable range. Recently, the government has introduced a series of monetary, fiscal, and investment policies aimed at stabilizing growth. Many research institutions and experts believe that the macroeconomy may bottom out and begin to rebound in the second quarter. As these growth-stabilizing policies and measures start yielding tangible results, coupled with the implementation of the Belt and Road Initiative, the Yangtze River Economic Belt development strategy, and the coordinated development strategy for the Beijing-Tianjin-Hebei region, as well as ongoing construction of infrastructure and major projects, demand for products such as steel and cement—and electricity consumption—will increase, thereby boosting coal consumption as well. It is expected that the decline in coal consumption will gradually narrow in the second half of the year, and total coal consumption for the year may remain broadly stable.

　　From the supply side, this year the state continues to intensify efforts to help the coal industry overcome its difficulties, cracking down rigorously on illegal and non-compliant construction and production activities. Coal enterprises are increasingly aware of the need to voluntarily reduce output. Major coal-producing provinces (and autonomous regions) such as Shanxi and Inner Mongolia, along with major coal companies like Shenhua and China National Coal Group, have proactively cut production, and annual output is expected to decline by 5%.

　　“In addition, government departments are actively helping the industry overcome its difficulties. Since last year, relevant government agencies have established a joint mechanism for assisting the coal industry in its recovery, holding joint meetings nearly every week and successively introducing more than 30 policy measures. With the implementation of these policies and measures, the coal industry achieved phased progress in its recovery efforts by the end of last year,” said Dong Yueying. “Since the beginning of this year, as the market situation has become even more complex, the task of helping the industry out of its difficulties will also become even more challenging.”

　　According to Dong Yueying’s analysis, the national coal market situation in the second half of the year may show a trend of improvement. However, the structural imbalance between supply and demand—where supply exceeds demand—will still be difficult to fundamentally reverse. If major coal-producing regions and large coal enterprises can effectively reduce production as planned, the supply-demand relationship for coal will significantly improve.