China’s appetite for coal is waning as imports fall sharply in recent months. 

While most energy imports, including crude oil and natural gas, saw an increase after recent year-on-year declines, coal imports presented a different trend in June. 

Coal imports dropped by over 25% year-on-year to 33 million tons, marking their lowest volume in over two years, according to official data. 

Coal imports saw their fourth consecutive month of year-on-year declines, a trend that has recently accelerated.

In the first six months, China imported more than 10% less coal than in the first half of 2024. There are two main reasons for this.

Rising output and electricity demand

Firstly, coal production in China saw a 3.9% increase in June compared to the previous year, as indicated by recent industrial production figures, according to Commerzbank AG. This rise signifies a continuing upward trend in the country’s coal output.

China’s increased coal production significantly impacts imports, as only about 10% of its coal demand is met by foreign sources.

Over the first half of the year as a whole, the increase was as high as 6.8%.

Secondly, a 2% decrease in electricity production from coal-fired power plants in the first half of the year, compared to the same period last year, is negatively impacting demand, the German bank said in a report.

Source: Commerzbank Research

“We also expect both developments to continue,” Volkmar Baur, FX analyst at Commerzbank, said in the report. 

China’s investment in coal mining remains very high, despite stagnating demand for coal.

Investment surged by approximately 20% in the first five months of this year compared to the previous year, indicating a continued expansion of capacity.

Coal-fire power generation to fall

Investments in renewable energy by China are expected to continue the downward trend of coal-fired power generation, Baur said. China’s substantial investments in renewable energy capacities are the driving force behind this.

China’s solar power capacity reached approximately 1080 gigawatts in May, a figure exceeding the total capacity of the European Union by more than fivefold.

Capacity has surged by over 56% in the past year, with nearly 200 GW added since January alone, Baur said. This recent addition is comparable to the entire installed capacity of the EU.

Source: Commerzbank Research

Solar power production experienced significant growth, increasing by over 35% in 2024, and further rising by 40% in the first half of 2025 compared to the same period in the previous year.

Baur added:

The higher increase in capacity compared to production also shows that China is struggling to use its capacity efficiently due to the rapid pace of expansion. The utilisation rate has therefore fallen in recent years.

“However, continued high investment in the grid, which also rose by 20% year-on-year, suggests that these difficulties can be overcome over time.”

Solar power output is expected to keep increasing, even with a potential slowdown in capacity growth.

Coal-fired power still dominates

Coal-fired power still accounts for the lion’s share of China’s energy mix.

“However, looking at a rolling 12-month period to exclude seasonal factors, the share of coal-fired power fell below two-thirds for the first time in May and is likely to continue falling,” Baur added. 

Additionally, China’s demand for coal is expected to decrease in the coming years due to an anticipated absolute decline in coal-fired power generation.

Combined with continuing production growth, China might just even become a coal exporter in the next few years.

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