China coal inspections offer price hope as Australian miners await rebound

China's new coal mine inspections to rein in excessive output are expected to help finally trigger a price revival, but Australian miners are waiting for a tangible rebound.

Metallurgical coal prices in China rallied on July 22 after Henan province's Department of Industry and Information Technology asked authorities to ensure local coal mine output is within allowable limits, Platts reported earlier. Platts is part of S&P Global Energy.

The National Energy Administration in a July 11 circular said it plans to stabilize supply and will also start inspecting coal mines in the Shanxi, Inner Mongolia, Anhui, Henan, Guizhou, Ningxia and Xinjiang areas. Coal mines exceeding their output capacity by 10% in the first half of 2025 and in 2024 would be asked to shut down, according to the NEA. Whitehaven Coal executives hoped that this trend would lead to price recovery.

"We've been waiting to see signs of China making some changes to its current situation," Whitehaven managing director Paul Flynn told a July 25 analyst call for the second quarter production report. "We thought there had to be something there ... They think they've got more production than what's currently authorized at various places. So I think that's a positive thing."

"We would expect them to follow it up and there to be a moderation of domestic production that will be consistent with what we're seeing in terms of the wind back of Indonesian imports into China as well," Flynn said.

While metallurgical coal futures "seem to have responded" to the announcement, Flynn cautioned that "we want to see the real results on the ground to make sure that the indices start to reflect what looks to be directional positive changes."

"Coal prices have bounced off the bottom on the thermal side. We're yet to see a real bounce off the [metallurgical] side. The futures are signposting expectations of a better day [ahead], but let's wait and see that emerge," Kevin Ball, Whitehaven's CFO, told on the call.

The NEA orders to inspect key Chinese coal hubs could lead to some supply squeeze, analysts with the China Coal Transportation and Distribution Association said. The heightened safety controls at domestic mines are expected to become a norm in China, they added.

Metallurgical coal markets have seen "sluggish demand on weak global economic conditions, global trade tariff concerns and the export of excess steel supply from China," Mark Salem, Yancoal Australia Ltd.'s executive general manager of marketing, told a Q2 results analyst call on July 18.

The Platts-assessed premium low-volatile hard coking coal FOB Australia was $177/mt on July 29, down from $216.9/mt a year prior. Whitehaven reported that the Platts premium low-volatile HCC FOB Australia Index averaged $184/mt for the June quarter, down from $243/mt a year earlier. The index also averaged $196/mt for fiscal 2025, down from $287/mt for fiscal 2024, according to Whitehaven.

The average Australian Steam Coal FOB Newcastle price was $105.86/mt on July 24, down from $143.33/mt a year prior, according to S&P Global Market Intelligence data. Whitehaven reported the globalCOAL NEWC index averaged $100/mt for the June quarter, down from $136/mt a year prior. The index also averaged $121/mt in fiscal 2025, compared to $136/t in fiscal 2024.

Whitehaven's June-quarter managed run-of-mine production rose to 10.6 million mt from 9.7 million mt a year prior. Its fiscal 2025 ROM output rose 60% to 39.1 million mt courtesy of a full year of owning the Blackwater and Daunia coal mines in Queensland.

Mixed signals out of Asia

Yancoal observed a "very small" recovery in China domestic prices on increased demand and decreasing stocks from the "hot summer. On the back of that, we should see some recovery in the domestic prices ... but we're just waiting to have a little bit more substance behind that position at the moment," Salem said.

China's total coal imports have fallen on the back of "very strong" 2024 domestic coal production of 4.7 billion mt, with the current annualized rate "touching on 5 billion [mt]," Salem said.

Indonesian exports have fallen 11% year-to-date due to weather impacts and lower demand, while Colombian exports are down 23%, "mostly in response to lower prices and from planned cuts in production," Salem said. India's early monsoon "bolstered hydro power generation and, combined with higher domestic production, domestic imports dropped 5% so far this year," the executive reported.

Japan's imports have also fallen 6% year-to-date due to increased nuclear power generation and gas-fired power availability; while South Korea and Taiwai's imports have also dipped due to more biomass co-firing and gas powered generation, Salem said.

On the positive side, Vietnam's coal imports rose due to new coal-fired power builds, as did Europe's due to gas market uncertainty, and Yancoal has seen increased spot buying activity "on the back of inconsistencies in renewable and nuclear generating capacities in the Asian areas," Salem said.

Overall, global thermal coal demand "remains strong" despite Port of Newcastle closures in the June quarter due to bad weather, which extended ship queues and impacted about 2-2.5 million mt of exports, Salem said.