China’s leading coal producers are shifting focus toward power generation as fuel prices drop and the country’s electrification push gains momentum in the low-carbon transition.
Mining profits for major players like China Shenhua Energy Co., the largest producer, and China Coal Energy Co. have been squeezed this year due to a weakened coal market. Widespread mining expansion has led to an oversupply, with benchmark coal prices down nearly 8% and industry profits slumping by 22%.
In response, Shenhua reduced coal output in the third quarter and has been redirecting investments from mining to power generation, adding 305 megawatts in new capacity, largely from solar. Rising operational costs driven by aging coal deposits that require deeper drilling and increased maintenance are also a factor, noted Shenhua’s CFO, Song Jinggang. Chairman Lv Zhiren highlighted that the company is making use of the remaining “window of opportunity” to open new mines and thermal plants by 2025, as coal consumption is expected to peak soon to meet President Xi Jinping’s climate goals.
This year, Shenhua announced plans to halve its coal unit budget and reduce its annual output target. Its parent company, China Energy Investment Corp., the country’s largest thermal power plant operator, has surpassed its 2025 renewable energy targets and is now the world’s largest wind and solar operator.
China Coal Energy, the fourth-largest miner, has also accelerated its thermal power investments to offset risks in mining, positioning itself as the sixth-largest investor in thermal power last year.
While power generation remains more profitable than mining, it faces new challenges. Increasingly competitive regional markets are pushing down electricity rates, especially as renewables become more cost-effective. In Guangdong, where market liberalization is underway, nearly half of power suppliers reported difficulty breaking even due to rates falling below production costs.
