The perspective of the birth and economy: the coal price is extremely high and the relationship between supply and demand is reversed

The coal market in Shanxi has experienced a dramatic shift, with supply and demand dynamics reversing sharply. Before June this year, coal production in the province was constrained, leading to severe shortages and record-high prices. Coking coal, in particular, was nearly unattainable at over 700 yuan per ton, forcing many coke enterprises to halt operations due to lack of supply. However, by late June, a clear downward trend in coal prices began to emerge. According to an economic analysis report from the Shanxi Provincial Economic Committee in mid-July, coking coal prices were expected to continue falling in the second half of the year. This marked a turning point for the industry, as similar price declines were observed in other major coal-producing regions across China. Analysts noted that the market had reached a critical inflection point, signaling a potential long-term shift in coal pricing trends. Since July, coal prices have been declining in key producing areas, with Shanxi accounting for a quarter of national coal production and a third of coal shipments. For the first time since 2000, coal sales prices have dropped. In Linfen, a major coal hub, the price of main coking coal fell from 715 yuan/ton in June to 645 yuan/ton in July, and further declined by over 50 yuan/ton by late August. The average selling price of coal in state-owned mines in Shanxi has also dropped, with some cities like Taiyuan seeing a 10% decrease, while Changzhi and Jincheng reported drops of up to 20%. This trend is not isolated to Shanxi. Shenhua Group reduced its coal trading price at Qinhuangdao Port, Yanzhou Coal Mining lowered blended coal prices by 30 yuan/ton, and Datun Coal & Power cut screening blended coal prices by 20 yuan/ton. In August, many large state-owned coal mines in eastern China followed suit, lowering their transaction prices by 30–50 yuan/ton. The Qinhuangdao Port, a key distribution center, also saw a drop of about 30 yuan/ton. Industry experts attribute the decline to increased coal supply, expanded transportation capacity, and slower demand. From January to July, Shanxi produced 233 million tons of raw coal, a 6.5% increase year-on-year. Nationally, coal output rose by 8.8%, reaching 1.119 billion tons. Increased imports and reduced exports further boosted domestic supply by over 14 million tons. Additionally, government measures such as reduced import tariffs on thermal coal and tax rebates for coal exports have contributed to the oversupply. As production surged, so did coal shipments. Shanxi’s railway traffic reached 207 million tons from January to July, up 18.9% compared to the same period last year. This influx led to a significant buildup of coal in ports like Qinhuangdao, where stockpiles exceeded the theoretical limit by over 1.3 million tons. Meanwhile, demand has slowed. After May, steel production capacity surpluses forced coal-dependent industries like coking to reduce output by 20–40%. Heavy rainfall in southern provinces boosted hydropower generation, reducing thermal coal demand. Some power plants in Shandong now hold coal inventories for up to 40 days, making it difficult to absorb excess supply quickly. Downstream users are pushing for further price cuts, with companies like Maanshan Iron and Steel requesting reductions from major coal producers. Several coal mines have already responded by lowering prices. Speculative traders, who previously held large coal stocks, are now selling off, and coal from other provinces is flooding into Shanxi, exacerbating the price decline. While the drop in prices benefits downstream industries, analysts warn that rising global oil prices could shift energy demand back to coal. Moreover, the government is tightening regulations on small and medium-sized mines, which may eventually reduce supply and stabilize prices. As of August, over 1,900 coal mines in Shanxi were ordered to halt operations for safety inspections, signaling stricter oversight. Despite these challenges, the coal market remains volatile. While a sharp drop in prices is unlikely, the balance between supply and demand will continue to shape future trends. For now, the industry is navigating a complex landscape of oversupply, regulatory changes, and shifting energy demands.

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