China’s coal stockpiles waste enough energy to power the entire US for a year

China has amassed a staggering 636 million metric tons of coal by June 2024. This accumulation, enough to blanket Singapore in soot nearly a metre deep, resulted from a government-mandated effort to prevent the power shortages.

While this strategy has successfully secured energy reserves, the massive stockpile now poses challenges related to storage degradation and market pricing.

The effects are far-reaching, impacting both domestic energy markets and international coal trading, as the quality and value of this stored coal continue to decline.

Why China boosted its coal reserves to record levels in 2024

China’s coal reserves have surged as a result of aggressive government policies aimed at preventing power shortages.

After the significant power cuts of 2021, Beijing directed coal mines and power plants to increase both production and reserves, leading to a rapid build-up of stockpiles.

This move was intended to stabilise energy supply and avert another energy crisis. However, the resulting vast coal reserves now face challenges related to degradation, impacting their energy content and market value.

China’s coal output drove 97% of the global increase since 2018

Since 2018, China’s coal production has been the primary driver of global output increases, accounting for approximately 97% of the total rise.

This dramatic growth underscores the country’s reliance on coal to fuel its economic engine.

With a massive stockpile now sitting idle, China’s coal strategy is shifting from ramping up production to managing the quality and market dynamics of its existing reserves.

The downside of coal storage

Unlike strategic reserves of oil or precious metals, coal does not retain its value indefinitely. Over time, coal reacts with oxygen and loses its energy potential—a process that can lead to spontaneous combustion in extreme cases.

Even under controlled conditions, it is estimated that a coal stockpile can lose about 25% of its energy content annually.

This deterioration explains why, despite high inventory levels, coal prices have not plummeted as expected.

The current elevated prices reflect a demand for higher-grade coal, which remains scarce amidst a sea of declining-quality stockpiles.

Impact on international coal trade

China’s focus on blending higher-quality coal has significantly affected international trade. Low-grade coal imports, which previously formed a substantial part of China’s supply, have been sharply reduced.

For instance, Indonesia’s market share, which stood at nearly 50% in 2021, has dropped below 15% as China increasingly favours higher-calorie coal to blend with domestic supplies.

This shift signals a strategic pivot in China’s coal consumption model, favouring efficiency over volume.

Energy transition or waste management?

While climate advocates might initially view the unburned coal as a positive development, it is a double-edged sword.

The oxidation of coal in stockpiles emits carbon dioxide, just as burning it in power plants does, but without producing any usable energy.

This presents a worst-case scenario for environmental impact, as both resources and emissions are wasted. It also casts doubt on the long-term sustainability of China’s coal-centric energy policy.

Despite maintaining high production levels in 2024, China’s coal consumption across key sectors has shown weak growth or even declines.

Cement output fell by 11%, steel production by 2%, and thermal power generation increased by a mere 0.5%.

This sluggish consumption trend, combined with a rising focus on alternative energy sources like hydroelectric power, highlights the complexities in China’s future energy landscape.

The vast coal reserves amassed by China may signify a peak in its coal reliance. With consumption declining across major sectors, the stockpile could become a monument to a bygone era of coal dependency.

This shift may signal a critical turning point for global emissions trends, as the world’s largest coal consumer begins to pivot away from its dirtiest energy source.