China may reimpose import controls on coal following warnings from key industry groups about the growing oversupply in the world’s largest coal market. According to analysts at Morgan Stanley, while a complete ban is unlikely due to China’s obligations to the World Trade Organization, the government could discourage further imports by introducing delays or stricter inspections. This approach mirrors similar measures implemented in 2014, 2017, and 2018.
China, which had capped its coal imports at 300 million tons annually until 2022, significantly exceeded that limit in recent years due to heightened energy security concerns. Last year, the country imported a record 543 million tons. However, demand has now fallen far below expectations, resulting in a sharp drop in prices and declining profitability for coal miners. The China Coal Transportation and Distribution Association, along with the China National Coal Association, urged miners to control production and for importers to reduce shipments of lower-quality coal to address the growing stockpiles.
Beijing’s push for higher coal production in recent years was aimed at avoiding another power crisis like the one seen in 2021, with Russia’s invasion of Ukraine in 2022 reinforcing the need for energy security. While the strategy has been successful in ensuring a steady supply of energy, it has hindered progress on decarbonization efforts and has led to a series of fatal mining accidents.
In recent months, oversupply and weak demand have created significant strain on the market, driving down the country’s benchmark thermal coal price to 699 yuan per ton—its lowest point since March 2021. Spot prices may soon test the market’s floor, set by government-regulated contracts at 675 yuan per ton.
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