In the autumn of 2021, a wave of blackouts swept across China’s industrial northeast, silencing factories, disrupting ports, and even cutting power to residential neighbourhoods – an unprecedented event in a country known for its tight control over infrastructure and energy systems. The episode marked more than just a temporary power crisis; it was a moment of reckoning that would reshape the foundations of China’s coal and energy strategy in the years to follow. The immediate causes of the 2021 crisis were multifaceted. Domestic coal production, already under pressure from tighter environmental regulations and a renewed focus on mine safety, struggled to keep up with a postpandemic surge in demand. Hydroelectric output, a significant component of China’s energy mix, was weakened by poor rainfall, while diplomatic tensions had effectively ended Australian coal imports – a crucial source of high-quality thermal coal. By September, thermal coal prices on the Zhengzhou Commodity Exchange had more than doubled, climbing above 1,400 yuan per tonne, and many power producers, operating under fixed-price electricity contracts, simply chose to scale back generation rather than incur losses.
From late 2021 through 2024, China pursued a twin-track strategy: reinforce coal as the “ballast” of energy security while accelerating the broader transition to renewables. This was not a reversal of climate targets – the country remains committed to peak carbon emissions by 2030 and carbon neutrality by 2060 – but a recalibration of priorities. The coal sector was placed back at the centre of energy security planning. Numerous mine expansions were approved, particularly in Inner Mongolia and Shaanxi, while new projects were fast-tracked to strengthen base-load capacity. Simultaneously, investment in renewable capacity surged. In 2023 alone, China added 216 GW of new solar and wind installations – nearly double Germany’s entire installed power capacity – positioning the country as the global leader in clean energy deployment. In parallel, Beijing took steps to reduce vulnerability to external supply shocks. Following the re-opening of trade ties with Australia in 2023, coal imports resumed, complementing supply from Indonesia, Russia, Mongolia, and South Africa. Strategic coal reserves were also formalized, with both national and provincial stockpiles being established – a concept borrowed from the oil sector, aimed at buffering future disruptions.
Yet despite the structural emphasis on security, 2025 has so far been marked by subdued import activity. According to the General Administration of Customs China, thermal coal imports fell to just 22.76 million tonnes in June – down 32.0 percent year-on-year and the lowest since February 2023. Volumes from Indonesia, China’s main external supplier, fell nearly 30 percent year-on-year to 11.57 million tonnes, averaging 386,000 tonnes per day – 3.7 percent lower than May. Behind this decline lies a convergence of factors: a narrower import arbitrage, elevated domestic production, and high stockpiles accumulated earlier in the year. June domestic raw coal output rose 3.9 percent year-on-year to 421.1 million tonnes, while first-half 2025 production reached a record 2.42 billion tonnes – up 7.4 percent year-on-year. As a result, total coal and lignite imports for June declined 8.3 percent month-on-month, bringing the first-half 2025 total to 221.7 million tonnes – a significant 11.1 percent drop from the 249.5 million tonnes recorded during the same period in 2024. Metallurgical coal has followed a similar pattern. Despite a month-on-month increase in June – rising from 8.70 million tonnes in May to 10.28 million tonnes – total volumes remain lower on a year-to-date basis. Import demand has been constrained by lower industrial activity and higher domestic output, even as some arbitrage opportunities opened briefly in late Q2. June’s improvement was driven more by price movements than by structural shifts in demand. Overall, for the first half of 2025, metallurgical coal imports remain below the levels seen in the same period of 2024.
This week, coking coal futures in China have spiked, as reports of government inspections at mines sparked concern over supply curbs. The most active contract on the Dalian Commodity Exchange rose by 11 percent on Wednesday, hitting the daily upper limit for a third consecutive session – and reaching its highest point since February. At the same time, China is contending with record-breaking heat. Power consumption surpassed 1.5 billion kilowatts last week – an all-time high and the third consecutive weekly record. The government issued a nationwide alert for heat-related health risks, particularly for vulnerable populations. Coal consumption by power plants has risen accordingly, while port stockpiles – which reached record highs in May – have since declined by roughly 20 percent.
Should heatwaves persist into August, coupled with intensified government inspections or environmental enforcement that further constrain domestic coal production, Chinese importers could swiftly reenter the seaborne market with urgency. The precedent of 2011, when a sudden tightening of Chinese coal balances sparked a surge in freight rates, remains fresh in the minds of market participants. However, unlike that episode, Pacific freight rates have so far shown no significant signs of tightening in response to these recent developments, reflecting the greater resilience and flexibility built into China’s coal supply chain since then. Nonetheless, dry bulk shipping remains vigilant, aware that any unexpected supply disruptions or spikes in demand could rapidly shift market dynamics. For now, while the foundations for a potential freight rally exist, the full convergence of factors needed to ignite such a surge has yet to come into focus.
Data source: Doric