China's Coal Import Controls: A Blow to Global Oversupply and Prices

The global coal market is bracing for potential repercussions as China, the world's largest coal consumer and importer, considers restarting import controls on coal. This move, driven by oversupply and weak demand, could significantly impact the global coal market, particularly for countries like Russia and Mongolia, which are major suppliers to China.

Oversupply and Weak Demand

China's coal industry is grappling with lower-than-expected growth in coal demand from downstream companies and rising pressure from ample supply. This combination has cut domestic coal prices and eroded miners' profits, prompting two coal industry groups to call on their members to curb output and limit imports (Source: March 1, 2025 - Two coal industry groups in China call on their members to curb output and limit imports).

Energy Security Concerns

China's emphasis on energy security, which began following power shortages in 2021 and 2022, led to record high domestic coal production from 2021 to 2024 and a surge in coal plant approvals. However, this focus on energy security may shift as the country seeks to balance its coal supply and demand (Source: March 1, 2025 - Two coal industry groups in China call on their members to curb output and limit imports).

Policy Changes

The upcoming National People's Congress meeting in Beijing may offer more clues to Beijing's energy policy direction for the year, which could potentially include import controls on coal (Source: March 1, 2025 - Two coal industry groups in China call on their members to curb output and limit imports).



Impact on Global Coal Market

The reinstatement of import tariffs on coal by China will have significant implications for the global coal market, particularly for countries like Russia and Mongolia, which are major suppliers to China. The new policy, effective from January 1, 2024, imposes a 6% tax rate on coal exports from these countries, potentially increasing their offering prices and making Chinese thermal coal imports less cost-effective for consumers (Mysteel Global, 2024).

This development may lead to uncertainties in China's thermal coal imports from Russia and Mongolia, as the two countries together accounted for around 21% of China's total thermal coal imports over January-November 2023 (Mysteel Global, 2024). The increased costs for Russian and Mongolian coal exporters may result in higher prices for Chinese consumers, potentially reducing the attractiveness of these origins compared to other suppliers like Indonesia and Australia, which still enjoy zero import tariffs under China's new policy.



The impact of the tariffs on Russia and Mongolia's coal exports to China will depend on their ability to pass the higher costs incurred by the 6% tax rate down to consumers. If they cannot, it may lead to a decrease in their market share in China, potentially benefiting other coal suppliers with lower tariffs or no tariffs at all. However, it is essential to monitor the situation closely, as the actual impact may vary depending on market dynamics and the response of the affected countries.

In conclusion, China's coal import controls have the potential to exacerbate the ongoing oversupply situation in the global coal market, driving coal prices lower and negatively impacting coal-producing countries. The long-term implications may include a more pronounced decline in coal prices over the long term, potentially hastening the transition away from coal. However, it may also signal a turbulent endgame for coal, rather than a slow and steady decline, as demand continues to rise in countries like India and China.