China’s coal price surge may lose steam without policy support

Published Thu, Jul 24, 2025 · 11:53 AM

A rally in Chinese coal prices following government moves to tackle excess supply will probably be fleeting without policies that support demand, according to the leading industrial group.

The National Energy Administration (NEA) started inspections across eight provinces and regions this month, warning it may shutter coal mines that are producing above permitted levels. Since news of the crackdown emerged on Tuesday (Jul 22), coking coal futures in Dalian have surged more than 15 per cent.

Still, China Coal Transportation and Distribution Association Analyst Han Lei said top decision makers will need to offer macroeconomic support to maintain the momentum in prices. “It needs more than industrial efforts,” he said during a webcast on Wednesday for a weekly update on the market.

The NEA is carrying out the monthlong inspections, including in the biggest coal hubs of Shanxi, Inner Mongolia and Shaanxi, according to a document from the agency dated Jul 10. The notice first began circulating on Chinese social media on Tuesday, and sources familiar later confirmed it as authentic. Shares of listed miners initially rallied after the news but have since steadied.

China made a broad pledge to curb overcapacity among businesses at the start of this month, as authorities seek to halt the deflationary pressures hampering the world’s second-biggest economy.

On Wednesday, the Dalian Commodity Exchange noted that coking coal prices had “fluctuated greatly” and asked investors to “trade rationally”, according to a market risk advisory.

The thermal coal market has been less volatile. That part of the industry is unlikely to face a drastic crackdown on production given its importance for power generation and energy security.

Spot thermal coal traded at the key transport hub of Qinhuangdao port was at 645 yuan (S$115) a tonne on Wednesday, up 4 per cent this month, according to data from the CCTD. Prices are still about 25 per cent lower than the same period last year. BLOOMBERG

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