Understanding China's Rising Coal Imports

Kevin Tu, ChinaFAQs expert and senior associate at the Carnegie Endowment for International Peace, published a policy outlook earlier this month: Understanding China's Rising Coal Imports. This report analyzes China’s domestic coal consumption and import markets, and discusses next steps for managing China’s coal trade, production, and consumption patterns.


Summary

China is home to the world’s second largest proven coal reserves after the United States. In addition, prior to 2009, China was a net coal exporter. Coal is a cornerstone of the Chinese economy, representing 77 percent of China’s primary energy production and fueling almost 80 percent of its electricity. Moreover, China is the world’s top coal consumer, accounting for nearly half of global consumption in 2010.1

Over the past decade, China’s domestic coal output has more than doubled while its coal imports have increased by a factor of 60—the country’s dependence on other nations’ coal exports is growing.2 In 2009, the global coal market witnessed a dramatic realignment as China burst onto the scene, importing coal from as far away as Colombia and the United States. With 182 million tons (Mt) of coal sourced from overseas suppliers in 2011, China has overtaken Japan as the world’s top coal importer.3 Moreover, as the world’s top coal consumer, China’s imports could rise significantly again by 2015.4

Given the enormous size of China’s domestic coal reserves, why is China moving to import coal from abroad instead of producing all its needs domestically? Might this phenomenon be as superfluous and foolhardy as carrying coals to Newcastle, England’s major exporter of coal in the fifteenth century? Newcastle, after all, had more coal than anywhere else.

Several factors could be contributing to China’s sudden entrance into coal import markets, including transportation bottlenecks, environmental and safety considerations, economic factors, and concerns about depleting coking coal reserves. Gaining a thorough understanding of the paradigm shift under way in the international coal trade requires exploring these factors in order to develop policies to best manage burgeoning coal imports in China and beyond.

China’s move to import increasing amounts of coal to add to its vast stores of domestic reserves will influence the global economy, geopolitics, and the environment. Effective policy tools and governance structures will be needed for China to manage its coal use and for the international community to deal with repercussions from the burgeoning coal import markets. The outlook for effective policy responses is premised on new knowledge and assessment of coal trade, production, and consumption patterns:

First, China will need to enhance its coal value chain—from coal mining to preparation, transport, and end use—to improve efficiency, reduce the environmental and carbon footprint of coal, and address safety in the face of China’s increased global coal utilization and trade. Second, it will be important to gain a better understanding of the relative costs and benefits of China’s emerging coal trade and the differences among Chinese mining companies and between Chinese and foreign mining operations regarding mining practices, regulatory oversight, and operations. Third, the parallels underpinning energy and climate concerns in the United States and China could serve as the impetus for more bilateral cooperation on common coal conditions. Finally, oversight over growing global coal markets could be organized through new governance structures—international forums, regulations and standards, fiscal measures, and information—spearheaded by major coal export and import nations.

China’s recent move from being a net coal exporter to a net coal importer portends significant changes on the global stage, especially in terms of climate change. Understanding China’s rising coal imports is crucial for managing their global impact.

1. National Bureau of Statistics, China Energy Statistical Yearbook (Beijing: China Statistics Press, 2012); Statistical Review of World Energy (London: British Petroleum, 2011).
2. National Bureau of Statistics, China Statistical Yearbook (Beijing: China Statistics Press, various years).
3. O. Tsukimori and C. Aizhu, “China overtakes Japan as world’s top coal importer,” Reuters, January 26, 2012, www.reuters.com/article/2012/01/26/coal-china-japan-idUSL4E8CQ3GS20120126.
4. R. Kebede and M Taylor, “China coal imports to double in 2015,” Reuters, May 30, 2011.

Read the full report here.