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September 24, 2026 - China’s coking coal market could remain tight well into 2027 as stricter mine safety controls slow the recovery of domestic production, potentially keeping the world’s largest steel industry increasingly dependent on imported coal.
The supply crunch intensified following a fatal mine accident in Shanxi province in May 2026, which prompted widespread mine suspensions and tougher safety inspections across China’s most important coal-producing region.
Shanxi is particularly important to the metallurgical coal market. More than half of China’s domestic coking coal is produced in the province, according to the International Energy Agency, meaning even temporary disruptions there can have a significant impact on supplies available to the country’s steelmakers.
While Chinese authorities are now encouraging lower-risk mines to resume operations, analysts say the recovery is proving slower than initially expected.
Bloomberg Intelligence analysts expect Shanxi’s coking coal production to continue recovering during the fourth quarter, but say a full normalization of supply may not occur until the first half of 2027.
Dozens of Mines Remain Offline
Months after the initial disruption, a substantial amount of mining capacity remains unavailable.
A Mysteel survey cited by Bloomberg found that 75 coking coal mines in Shanxi were still shut as of September 16. Those operations represented nearly 73 million metric tons of annual production capacity.
Earlier surveys had shown gradual improvement. In August, Sxcoal reported 51 coking coal mines across five major Shanxi producing regions remained suspended, representing approximately 54.7 million metric tons of annual capacity.
But restarting a mine does not necessarily mean production immediately returns to previous levels. Operating mines have also faced tighter inspections, reduced shifts and other restrictions designed to improve safety.
Wood Mackenzie expects Chinese coal production to remain broadly stable during 2026. The consultancy said the May accident resulted in intensified safety inspections that contributed to a 9.7% year-over-year decline in output during June.
The restrictions also come against a broader regulatory effort to prevent mines from producing above their officially approved capacity. Inspections targeting overproduction began in 2025 and have increasingly become part of regular regulatory oversight.
That could limit how quickly Chinese producers can respond to higher prices by increasing output.
China Turns to Imports
The domestic shortfall has already produced a sharp increase in China's demand for foreign coking coal.
Chinese coking coal imports reached 13.1 million metric tons during August. Although that was approximately 4% below July’s peak, imports were still 29% higher than a year earlier and remained close to the record established in December 2025.
The increase has been even more pronounced when looking at the first half of the year.
China imported approximately 66.9 million metric tons of coking coal during the first six months of 2026, an increase of 26.7% from 52.8 million tons during the same period of 2025.
Mongolia has been by far the biggest beneficiary.
China imported roughly 40.6 million metric tons of Mongolian coking coal during the first half of 2026, up nearly 64% from a year earlier. Mongolia consequently supplied approximately 61% of China's imported coking coal during the period.
Russia supplied another 17.3 million tons, while Australia provided approximately 4.6 million tons.
Mongolia’s Importance Continues to Grow
Mongolia's expanding role is becoming one of the biggest structural changes in China's metallurgical coal market.
The country supplied 60.07 million metric tons of coking coal to China in 2025, accounting for roughly half of China's imports. Industry analysts have suggested shipments could climb toward 80 million tons or more during 2026.
Cost is one reason.
Mongolian coking coal can be considerably cheaper than coal produced in China's primary mining regions. Its relatively low ash and sulfur content also makes it useful for blending with Chinese coal.
Infrastructure improvements are strengthening that advantage. Expanded border capacity, automated customs facilities and new railway connections are reducing the cost and time required to transport Mongolian coal into China.
Additional cross-border rail infrastructure expected from 2027 could further expand Mongolia's ability to supply Chinese steelmakers.
Some industry estimates suggest improved infrastructure could eventually allow Mongolian exports to China to approach 100 million metric tons annually.
Australia and Russia Also Help Fill the Gap
Other major coal exporters could also benefit from China's supply problems.
Australia remains the world's dominant exporter of metallurgical coal, with the IEA expecting Australian exports to exceed 150 million metric tons in 2026.
Russia has also redirected significant volumes of coal toward Asian markets, although sanctions and transportation bottlenecks continue to complicate its export trade.
Together, Mongolia, Russia and Australia are helping China compensate for reduced domestic production. However, analysts believe additional imports may not be enough to completely replace the coal lost from Shanxi.
Quality is part of the problem.
Not every imported coal can directly replace China's higher-quality domestic coking coal. Steelmakers typically blend several coal grades to obtain the characteristics needed to produce metallurgical coke, making certain premium grades particularly difficult to substitute.
High Prices Meet Weak Steel Margins
The supply shortage has also produced considerable volatility in Chinese coking coal prices.
Dalian coking coal futures reached 1,729 yuan per metric ton on August 31, their highest level in more than two years.
Prices subsequently retreated roughly 12% to around 1,523.50 yuan as expectations grew that domestic mines would gradually restart.
But the ability of steelmakers to absorb higher raw-material costs is becoming another constraint.
Wood Mackenzie estimated that only about 7% of Chinese steel mills were profitable in September, leaving producers with little room to absorb persistently elevated coking coal costs.
That creates competing pressures on the market.
Restricted domestic production and strong import demand are supportive for coking coal prices, while poor steelmaking profitability could limit how much mills are willing or able to pay.
Supply Problems May Extend Into 2027
China's government is attempting to increase supply. The National Development and Reform Commission has called for mines suspended following the Shanxi accident to resume production more quickly where safety conditions permit.
But the recovery is likely to remain gradual.
Safety inspections remain stringent, regulators continue to scrutinize production above approved capacity, and some mines that have reopened are operating below their previous production levels.
The result could be a fundamentally tighter Chinese coking coal market extending into the first half of 2027.
For international metallurgical coal producers, that could provide an important source of demand even if China's steel industry remains under pressure.
Mongolia appears particularly well positioned because of its proximity, lower transportation costs and rapidly improving rail infrastructure. Australia and Russia could also continue supplying additional tons.
The key question heading into 2027 will be how quickly Shanxi's mines can safely return to normal production.
Until they do, China may have little choice but to continue relying heavily on the international market to supply one of the most important raw materials used by its massive steel industry. |
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