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China's coal production is significantly outpacing demand, creating oversupply and driving down prices to an 18-month low of 790 yuan per ton. Despite the usual seasonal rise in coal use for winter heating, large inventories and slow economic growth are suppressing prices, which analysts expect to drop further to around 730 yuan per ton before the Lunar New Year.

Domestic coal output hit record levels recently, and imports remain elevated as the government prioritizes energy security over emissions reductions. Stockpiles have grown by 12% in recent months, reflecting this push for higher production. Authorities plan to maintain this momentum, targeting a record 4.8 billion tons by 2025.

Weak demand is evident as buyers hesitate to engage the market, waiting for prices to stabilize. Key coal ports are experiencing reduced activity, with vessel traffic around the Bohai Sea at half of last year's levels. Analysts predict demand will rise modestly next year, but production growth may keep prices subdued.

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This oversupply comes as global coal demand continues to set records, driven largely by electricity generation needs. Despite growth in renewable energy sources, coal remains a dominant power source, with China and India leading consumption. China's reliance on coal, accounting for more than half of global use.