MARCH DATA UPDATE：SUPPLY STRONG BUT DEMAND WEAK;COAL PRICES BOTTOMED OUT
On April 16, the National Bureau of Statistics (NBS) announced that China’s raw coal output rose 8.1% YoY to 1.2bnt and coal imports fell 0.9% YoY to 114.85mnt in 1Q25.
Comments Output grew rapidly; imports edged down. In 1Q25, China’s raw coal
output rose 8.1% YoY to 1.20bnt. In March, raw coal output increased 9.6% YoY to 441mnt, up 5.6% compared with March 2023, with monthly average daily output at 14.21mnt. We attribute the YoY growth to a low base effect formed due to the production cuts in Shanxi during March 2024. China’s coal imports fell 0.9% YoY to 114.85mnt in 1Q25. In March, coal imports declined 6.4% YoY but rose 12.7% MoM to 38.73mnt.
Thermal power generation remained weak. China’s GDP grew 5.4% in
1Q25. According to the China Electricity Council1, power consumption increased 1.3% YoY in 2M25. In 1Q25, the power generation of companies above a designated size fell 0.3% YoY to 2,269.9bn kWh, with the growth rate 1.0ppt higher than in 2M25. Thermal power generation declined 4.7% YoY to 1,532.7bn kWh, with the growth rate 1.1ppt higher than in 2M25. In March, power generation rose 1.8% YoY to 778bn kWh, falling 2.3% YoY to 509.9bn kWh for thermal power, but rising 9.5%, 23%, 8.2%, and 8.9% YoY for hydropower, nuclear power, wind power, and solar power.
Thermal coal: Bottomed out in slack season. Since the beginning of
April, the average price of Qinhuangdao 5,500 kcal thermal coal has declined 1.8% from March and 18% YoY to Rmb672/t. As of April 15, the average price of Qinhuangdao 5,500 kcal thermal coal stood at Rmb672/t.
In the near term, we believe supply and demand conditions may remain loose, and coal prices may continue to bottom out. On the demand side, we expect daily thermal coal consumption to remain weak in the current slack season, given slowing power consumption growth and strong renewable energy output. Looking ahead, the market is concerned that coal demand may fail to trend upward during the upcoming peak season
due to external uncertainties. However, we expect policies aimed at stimulating domestic demand to gradually show effect.
On the supply side, we believe that it still takes time for domestic coal production to decline. We think coal imports may fall due to the inversion of domestic and overseas prices of some coal products, as well as the potential contraction in overseas coal supply amid cost pressure.
Coking coal: Weak performance. In 1Q25, output of cast iron and crude steel rose 0.8% and 0.6% YoY to 216mnt and 259mnt. In March, output of cast iron and crude steel increased 3.1% and 4.6% YoY to 75.29mnt and 92.84mnt. The average price of coking coal at Jingtang Port has been Rmb1,400/t since the beginning of April, down 0.4% from March and 32% YoY.
We note that falling furnace charge prices and rising steel profits have supported steel output. However, we think uncertainties in tariffs may weigh on steel demand, potentially leading to persistent sluggishness in coking coal prices in the short term. We also think coking coal prices are unlikely to fall sharply in the short term, as some coal companies have incurred losses, and coal companies may control their capacity utilization rates to ensure production safety.
Valuation and recommendation
We maintain our earnings forecasts and ratings for the companies in our coverage universe.
Risks
Disappointing recovery in demand; sharper-than-expected increase in supply.