China coal long-term outlook H2 2020: strong demand overcomes coronavirus impact to support price recovery

China’s thermal coal market in 2020 was highly unpredictable. The QHD price dropped to below RMB470/t in May as supply recovered faster than demand once the country emerged early from lockdown. However, the price soon shot up by around RMB200/t to above RMB670/t in December, mainly due to supply restrictions. This highlighted that legal output levels are insufficient to maintain demand in the near term. The market situation will look different before China peaks carbon emissions in 2030 and after that is achieved. China needs to add supply to stabilise coal prices in the medium term but reduce supply to underpin prices thereafter. We still expect hot metal and metallurgical coal demand to increase year-on-year to a peak in 2020 before falling for the rest of our forecast period. Although overall metallurgical coal demand will fall after 2020, domestic supply will also decline, keeping coal imports above 50 Mt in the long run. For more details, please read our report.