China mined a record amount of coal in 2021. It might produce even more this year

By Laura He, CNN Business

China produced more coal than ever last year as its power stations struggled to meet demand for electricity, undermining plans to curb carbon emissions.

While the surge in output helped bring the power crisis under control, coal prices are creeping up yet again this year amid expectations that China is going to need even more of the fossil fuel to power its economic recovery.

Coal output hit a record 4.07 billion metric tons last year, up 4.7% from 2020, according to data released by China’s National Bureau of Statistics earlier this week. Imports of coal also rose last year, to their highest level since 2013.

China is already the world’s largest coal producer and consumer, but its record production is notable given that just a year ago the country was touting aggressive measures meant to seriously curb its emissions.

In September 2020, Chinese President Xi Jinping declared that the country would become carbon neutral by 2060, and his government took drastic steps in the first half of 2021 toward making that a reality — including shutting down hundreds of coal mines.

Those ambitions — which analysts already suspected would be tough to achieve, especially as China’s economy recovered — were challenged by a power crunch last year, as coal supply fell sharply. The country recorded widespread power shortages, including household blackouts. Factories were also forced to cut production, causing disruption to supply chains.

To ease the crisis, China ordered mines to boost coal production last fall. By December, production had jumped more than 7% from a year earlier to an all-time monthly high of 385 million metric tons, recent statistics show. That was also the third straight month of increases.

Even Xi has softened his tone a bit on carbon emissions, suggesting that Chinese leaders understand the challenges of their targets.

“Carbon peak and carbon neutrality cannot be realized overnight,” Xi said Monday in an online speech at the World Economic Forum. “Through solid and steady steps, China will pursue an orderly phase-down of traditional energy in the course of finding reliable substitution in new energy.’

Meanwhile, prices in China for thermal coal — which is mainly used to generate electricity and provide heating — have shot higher in recent days. Thermal coal futures surged nearly 7% on Wednesday to about 775 yuan ($122) per metric ton, according to the Zhengzhou Commodity Exchange. The contract has soared 13% so far this year.

China expects its power consumption “to continue its rapid growth in 2022,” said Li Yunqing, an official with the National Development and Reform Commission, at a press conference on Tuesday in Beijing. Consumption in 2021 was already strong, increasing 10.3% from 2020, according to government statistics.

Analysts from Guotai Junan Securities, a major Chinese investment bank, attributed January’s rebound in coal prices in part to a recent export ban on coal from Indonesia. China had been importing more coal from the Southeast Asian nation to keep up with its domestic demand, especially after reportedly restricting imports from Australia in late 2020.

The Guotai Junan analysts expect the demand for coal to remain strong this year, as China needs to stabilize economic growth, and coal power is critical to that plan, according to a research report on Tuesday.

Chinese policymakers have made it clear that ensuring stability is a top priority in 2022 and pledged to take proactive measures to support growth. Earlier this week, China reported its GDP grew 8.1% in 2021, outstripping the government’s own targets. But growth slowed to half that pace in the last quarter, and may not accelerate much this year, according to some economists.

Leaders of China’s ruling Communist Party said last month that they would prioritize investment in infrastructure in 2022 to bolster economic growth, as such projects can create more jobs. But such work is heavily reliant on fossil fuels.

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