Why China is the largest coal producer, but it still imports coal

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Biggest coal consumer

Over the years, China has built a massive mining capacity. It extracts as much coal as it can. The current mining capacity stands at 4.2 billion tons—four times greater than the U.S. However, the U.S. has twice as many coal reserves as China. As a result, China’s coal reserves are expected to last for ~30 years—at the current rate of consumption. The U.S. can use its reserves for over 200 years.

In 2013, ~600 million tons of the total coal demand was for met coal. It’s used in steel production. The rest of the demand—over 2.9 billion tons—was for thermal coal. It’s used in power generation. To understand the different types of coal, click here.

China's thermal Coal Imports

Largest importer

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China has a massive 1,260 gigawatt (or GW) installed power generation capacity. Most of the capacity is coal-fired. It also has half of the world’s total steel production. As a result, China consumes almost half of the total coal produced in the world. Even though it’s the biggest coal producer in the world, China is also the biggest coal importer in the world. In 2013, China produced 3.3 billion tons of coal. It imported another 192 million tons of thermal coal from other countries. This benefited the dry bulk shipping industry (SEA).

Where do China’s (FXI) coal imports come from? Why do companies like BHP Billiton (BHP), Rio Tinto (RIO), and Peabody Energy (BTU) benefit from China’s imports? We’ll discuss this in the next part of the series.

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