China’s Slumping Economy to Cut Coal Use Even as Output Swells

05/26/2022

2 minutes read

2022.05.26 09:10

(Bloomberg) — China’s demand for thermal coal is likely to keep falling through the rest of the first half, as virus restrictions continue to mire the economy in a deep slump.

Alongside measures to boost output and build stockpiles, that’ll give China a better chance of satisfying peak power demand over the summer, when air-conditioning needs are at their height, and retaining enough of a buffer to keep industry supplied into the autumn. A shortage of coal in the fall of 2021 contributed to unprecedented blackouts during a peak production period for many industries, and some southern provinces have warned this year over the potential for more outages heading into the hotter months.

Consumption of China’s mainstay fuel is expected to decrease moderately over May and June after slumping steeply in April, the China Coal Transportation and Distribution Association said at a briefing on Wednesday, citing weaker industrial activity and the availability of more hydropower following heavy rains. Rising temperatures and the easing of lockdown measures in Shanghai should offer some support to the market, it said.

At the same time, output remains elevated as miners heed the government’s call to ensure energy security. CCTD expects production this month to reach nearly 360 million tons. While that’s slightly lower than April, it’s 10% higher than a year ago. It’s also likely to suppress demand for imports that have only gotten more expensive in the wake of Russia’s invasion of Ukraine.

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(All times Beijing unless shown otherwise.)

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The resurgent virus is hitting gas demand, too, with many LNG buyers canceling their terminal slots. BloombergNEF estimates that China’s imports in May have fallen 2 million tons from last year to 5.1 million tons as many traders stayed on the sidelines while Covid was spreading.

Capacity canceled this year at PipeChina’s LNG terminals, according to BNEF:

On The Wire

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