China's coal industry is expected to maintain a downward trajectory in 2025, pressured by an ongoing supply glut and fragmented demand growth, said an industry analyst at a market summit on February 27.

Feng Dongbin, vice general manager of Fenwei Digital Information Technology Co., Ltd., drew the conclusion after delving into domestic coal demand, supply, prices and costs at the 2nd China Coal Import International Summit 2025 held in Guangzhou, southern China's Guangdong province.

In terms of coal demand, thermal coal consumption grew 3.2% year on year to 4.184 billion tonnes in 2024, buoyed by coal chemical capacity additions and centralized heating area expansions. However, the demand growth in the power sector was capped by renewable energy substitution. Thermal coal usage gains are projected to drop to 1.1% in 2025.

Coking coal demand dipped 0.6% from the previous year to 588 million tonnes in 2024 and is set to decrease by 1.6% this year, partly due to the stagnant real estate sector and lull steel destocking. Coke demand experienced short-lived rebounds along with favorable macroeconomic policies but was constrained by shrinking steelmaking profits in the long run.

On the supply front, China's coal production capacity totaled 6.3 billion tonnes per annum by end-2024, with thermal coal accounting for 77% and coking coal 23%, Feng noted. Inner Mongolia, Shanxi, Shaanxi, and Xinjiang, major coal-producing hubs in China, contributed 90% of the nation's cumulative capacity, with Shanxi remaining the primary coking coal producer.

State-owned enterprises dominated with a 70% market share. Key state-owned mines took 31% of total thermal capacity and made considerable contributions to the coking coal sector.

China is expected to add 347 million tonnes per annum capacity in 2025-2028, predominantly thermal coal.

Robust supply coupled with restrained demand pushed coal prices downward as a whole last year, with changes in supply-demand dynamics leading to notable oscillations.

Thermal coal prices climbed by 191 yuan/t in the first half thanks to stricter safety inspections and growing demand but plummeted in the latter half on stable supply and subdued demand.

Coking coal prices witnessed even wilder fluctuations due to supply disruptions. Fueled by accident-induced supply tightness, coking coal prices surged by 980 yuan/t, but then tumbled because of waned demand and ample supply.

Regarding costs, the average full cost of mine-mouth thermal coal stood at 286 yuan/t, and the ex-washplant cost for washed coking coal came in at 798 yuan/t, with moderate increases expected in 2025. More pronounced gains will be observed in the coking coal sector.

Profits diverged across different coal grades and mines, yet showcasing broader contractions. Surveyed thermal coal mines reported an average profit of 350 yuan/t, down 20% year on year, while surveyed coking coal mines saw their profits decline 52% to 593 yuan/t. Coking plants struggled with an average profit of merely 73 yuan/t, hovering near the break-even point throughout 2024. Surveyed EAF mills faced a loss of 258 yuan/t on average, persisting below the break-even point for a long time.

Looking ahead, Feng expected domestic coal prices to move lower further in 2025 dragged down by "the subpar peak season". Thermal coal prices may approach marginal costs given rising adoption of renewables and high inventories, while coking coal prices would face headwinds stemming from supply recovery and demand woes. Despite potential declines, coal imports are anticipated to linger high in 2025, further clouding the domestic market.

Future attention should be paid to non-power demand release and macroeconomic policy adjustments while accelerating capacity optimization and cost control to navigate market challenges, Feng said.