China Coal Economics: Quality, Costs, Prices and Generator Profitability
Summary
China produces approximately 4.9 billion tonnes (Bt) of raw coal annually, making it the world’s largest coal producer and consumer by a wide margin. When imports of around 0.5 Bt are added, total supply reaches approximately 5.4 Bt — roughly half of global coal consumption.
This note examines four dimensions of the Chinese coal industry that are relevant to the global energy outlook:
- Coal quality is declining. Average calorific value is falling as premium seams are exhausted and coal washing rates have dropped from their 2020 peak. More tonnes are needed per unit of useful energy.
- Production costs are rising structurally at approximately US$1.3/t per year, driven by deeper mining, safety regulation and labour costs. The industry-average mine-mouth cost reached 286 yuan/t (US$40/t) in 2024.
- Domestic coal prices have moderated from the 2021–22 crisis peaks but remain above pre-2020 levels, constrained by the NDRC’s 570–770 yuan/t guidance range for long-term contracts.
- The Big 5 state generators achieved a dramatic profit recovery in 2024 as coal costs fell faster than on-grid tariffs, but margins remain thin (3–5% net) and structurally vulnerable.
The overarching theme is a mature, cost-inflating industry where headline tonnage figures increasingly overstate the energy content being delivered.
Throughout this document: 1 USD = 7.2 RMB; 1 AUD = 4.5 RMB. Standard thermal coal (5,500 kcal/kg NAR) = 23.0 GJ/t.
Coal Quality and Grade Trends
Calorific value is declining
China’s average raw coal calorific value is approximately 5,000 kcal/kg (20.9 MJ/kg) — well below the benchmark 5,500 kcal/kg grade traded at Qinhuangdao (QHD) (United Nations Statistics Division, 2014).1 This average has been declining, driven by three structural forces:
Depletion of premium seams. Northern Shanxi, historically the source of China’s best thermal coal, has “depleted reserves of high-quality thermal coal and shifted entirely to mining lower-quality coal seams” (Centre for Research on Energy and Clean Air, 2023, citing Cinda Securities Research).
Geographic shift to lower-rank coal. Inner Mongolia — now China’s largest coal-producing province (Mysteel, 2024) — has significant lignite and sub-bituminous resources with calorific values of 4,000–5,000 kcal/kg, well below the Shanxi grades they are displacing.
Reduced coal washing (see below).
The NDRC itself flagged “decline in the calorific value of coal purchased by power companies” in August 2022. A China Electricity Council official identified a “clear decline in coal quality” linked to long-term contracts in January 2023 (Centre for Research on Energy and Clean Air, 2023).
The most telling indirect evidence: physical coal tonnage consumed per unit of electricity generated has grown faster than thermal power generation itself, implying that each tonne of coal delivered contains less energy than before (Centre for Research on Energy and Clean Air, 2023, citing Cinda Securities).
| Grade | Calorific value (NAR) | MJ/kg | Market role |
|---|---|---|---|
| Premium | 5,500 kcal/kg | 23.0 | QHD benchmark, tight supply |
| Mid-range | 5,000 kcal/kg | 20.9 | Growing share of market |
| Lower | 4,500 kcal/kg | 18.8 | Increasing proportion |
: Source: Industry convention. Price premiums between grades have widened, reflecting tight supply at the premium end (The Coal Hub, 2024b).
Coal washing peaked in 2020 and has declined
Coal washing (beneficiation) removes ash and inorganic sulfur, typically increasing net calorific value by 10–20%. China’s washing rate rose from approximately 25% around 2000 to a peak of 74.1% in 2020, then fell to 69.7% by 2022 — a 4.4 percentage point drop (Centre for Research on Energy and Clean Air, 2023, citing China Coal Industry Association).
| Year | Washing rate | Source |
|---|---|---|
| ~2000 | ~25% | Industry estimates |
| ~2010 | ~50% | Industry estimates |
| ~2015 | ~65% | Industry estimates |
| 2020 | 74.1% | China Coal Industry Assoc. |
| 2022 | 69.7% | China Coal Industry Assoc. |
: Source: China Coal Industry Association via Centre for Research on Energy and Clean Air (2023). Pre-2020 figures are approximate.
The post-2020 decline was driven by the government’s “supply assurance” response to the 2021 energy crisis, which prioritised tonnage over quality. The 14th Five-Year Plan target of 80% washing by 2025 appears unachievable.
Sulfur, ash and regulation
National average impurities are relatively stable in aggregate: approximately 1.1% sulfur and 16–17% ash (Wang, 2015; Wang et al., 2018). However, regional variation is extreme — Guizhou averages 38% ash, while northern Shanxi coals are significantly cleaner.
Regulation has truncated the worst tail of the quality distribution. From January 2015, China banned coal with >40% ash or >3% sulfur nationally, and imposed tighter limits (16% ash, 1% sulfur) for coastal regions (Air Pollution and Climate Secretariat, 2015; CNBC, 2014). Long-distance transport (>600 km) requires a minimum 3,940 kcal/kg. These regulations eliminated the worst material from commerce but cannot prevent the gradual decline in average quality of what remains in the ground.
Regional quality and production concentration
| Province | 2023 output | National share | Characteristics |
|---|---|---|---|
| Shanxi | ~1,360 Mt | ~28% | Historically premium bituminous. Premium seams depleting. Major coking coal source. |
| Inner Mongolia | ~1,200 Mt | ~25% | Mix of quality. Western Ordos good thermal; eastern IM significant lignite. |
| Shaanxi | ~700 Mt | ~14% | Jurassic thermal coal, 5,000–5,500 kcal range. |
| Xinjiang | ~450 Mt | ~9% | Growing rapidly. Long transport distance (~3,000 km to coast). |
| Top 4 total | ~3,710 Mt | ~76% | Share rising from ~72% in 2017 |
: Source: NBS via The Coal Hub (2024a) and Global Energy Monitor (2024).
The concentration of production in four provinces (up from ~72% in 2017 to ~82% by 2023) means their quality trends drive the national average. The shift toward Inner Mongolia and Xinjiang inherently pushes average CV downward.
Production Costs
Mine-mouth costs
The industry-average mine-mouth cost for Chinese thermal coal reached 286 yuan/t (US$40/t, US$1.73/GJ) in 2024 (Sxcoal, 2025). This sits between the extremes of China Shenhua at 179 yuan/t (predominantly open-pit Inner Mongolia mines) (Futunn, 2024) and marginal small-mine operators at an estimated 450–550 yuan/t (Thunder Said Energy, 2024a).
| Producer category | RMB/t | US$/t | US$/GJ | A$/GJ |
|---|---|---|---|---|
| Shenhua (best-in-class) | 179 | 25 | 1.09 | 1.72 |
| Industry average | 286 | 40 | 1.73 | 2.75 |
| Marginal (high-cost) | 450–550 | 63–76 | 2.7–3.3 | 4.3–5.2 |
: Source: Sxcoal Summit 2025 (industry average) (Sxcoal, 2025); Shenhua 2023 Annual Report (Futunn, 2024); Thunder Said Energy (marginal estimates) (Thunder Said Energy, 2024a). Converted at 5,500 kcal/kg = 23.0 GJ/t.
China’s mining is overwhelmingly underground: 87% underground, 13% open-pit, with an average mine depth of 456 metres and increasing (Thunder Said Energy, 2022). Surface mines are approximately 1.5–2x cheaper than underground operations (Mining Digital, 2024).
Cost breakdown
Based on aggregation of public disclosures from listed miners (Thunder Said Energy, 2024a):
| Component | US$/t | Share |
|---|---|---|
| Capital costs (new development) | ~20 | ~27% |
| Labour | ~10 | ~13% |
| Transport to eastern markets | ~10 | ~13% |
| Depreciation | 5–10 | ~10% |
| Washing/processing | 5–10 | ~10% |
| Income taxes | 5–10 | ~10% |
| Energy and materials | 5–10 | ~10% |
| Maintenance, royalties, G&A, remediation | remainder | ~7% |
| Total full-cycle | ~75 | 100% |
: Source: Thunder Said Energy analysis of China Shenhua, China Coal Energy, Yanzhou Coal disclosures (Thunder Said Energy, 2024a).
Structural cost escalation
Costs have been rising at approximately US$1.3/t per year — cumulating to roughly US$13/t over the past decade (Thunder Said Energy, 2024a). The drivers are:
- Deeper mining and thinner seams — the primary structural factor as shallow reserves in eastern provinces are exhausted
- Safety regulation — coal mine death rates fell 58% (from 0.106 to 0.044 per Mt) between 2017 and 2021 (Zhang et al., 2024), but at significant cost. Shenhua’s safety-related costs rose 13.9% in 2023 alone
- Labour costs — productivity has doubled over the past decade, but average salaries have quintupled. Direct labour costs have more than doubled to US$5–6/t (Thunder Said Energy, 2024b)
- Environmental compliance — external costs of mining estimated at 94 yuan/t (groundwater, subsidence, health), far exceeding the 30–50 yuan/t actually collected (Oxford Institute for Energy Studies, 2023)
Delivered cost chain
| Stage | RMB/t | US$/t | US$/GJ |
|---|---|---|---|
| Mine-mouth (industry avg) | 286 | 40 | 1.73 |
| Rail freight (Datong–QHD, 653 km) | 65–70 | 9–10 | 0.39–0.43 |
| Port handling (QHD) | 20–30 | 3–4 | 0.13–0.17 |
| Delivered to QHD | ~450 | ~63 | ~2.7 |
| Coastal shipping (QHD to south China) | 40–80 | 6–11 | 0.24–0.48 |
| Delivered to southern power plant | ~530 | ~74 | ~3.2 |
: Source: Author estimates based on Sxcoal (2025) (mine-mouth); China Coal International (2024) (rail rates at 0.1001 yuan/t-km); Thunder Said Energy (2024a) (other components).
The Daqin railway (Datong to Qinhuangdao, 653 km) is the single most important coal logistics artery. Rail freight rates were approximately 0.10 yuan/t-km in 2024, plus a flat base charge of 16.3 yuan/t (China Coal International, 2024).
International comparison
| Country | Mining method | FOB/pithead (US$/t) | US$/GJ | Notes |
|---|---|---|---|---|
| Indonesia | >90% open-cut | ~18 | ~0.72 | Lowest globally |
| China (mine-mouth, large miners) | 87% underground | ~25–40 | 1.1–1.7 | Domestic only |
| South Africa | ~50/50 | ~35–45 | 1.4–1.8 | Eskom contract coal |
| Australia | ~70% open-cut | ~50 | 2.0 | Down from 54 in 2024 |
| Colombia | Open-cut | ~59 | 2.4 | Highest export cost |
: Source: International Energy Agency (2025a); IEEFA (2024). Chinese figure from Sxcoal (2025) and Futunn (2024). GJ conversion at 6,000 kcal/kg = 25.1 GJ/t for export-grade coal; 5,500 kcal/kg = 23.0 GJ/t for Chinese domestic.
China’s mine-mouth costs are moderate by global standards, but the predominantly underground mining method and long transport distances to coastal demand centres push total delivered costs well above Indonesian and South African competition. The key point: Chinese coal is not cheap coal once transport is included.
Coal Prices
QHD 5,500 kcal/kg spot price history
The Qinhuangdao (QHD) 5,500 kcal FOB price is China’s most-watched domestic thermal coal benchmark, published weekly via the BSPI (Bohai-Rim Steam-Coal Price Index).
| Year | RMB/t | US$/t | A$/t | Phase |
|---|---|---|---|---|
| 2015 | ~385 | 55 | 86 | Overcapacity trough |
| 2016 | ~480 | 70 | 107 | Supply-side reform recovery |
| 2017 | ~630 | 93 | 140 | Post-reform plateau |
| 2018 | ~640 | 97 | 142 | Stable, NDRC “green zone” |
| 2019 | ~590 | 85 | 131 | Mild easing |
| 2020 | ~560 | 83 | 124 | COVID disruption |
| 2021 | ~1,050 avg; 2,600 peak | 163 | 233 | Energy crisis |
| 2022 | ~1,150 avg | 171 | 256 | Price cap + Ukraine shock |
| 2023 | 966 | 137 | 215 | Normalisation |
| 2024 | 863 | 120 | 192 | Decline, oversupply |
| 2025 | 699 (Jan–Nov avg) | 97 | 155 | Trough / recovery |
: Source: CEIC QHD 5500 data; SunSirs (2026); Sxcoal (2025). USD/AUD conversions at approximate annual average exchange rates. 2025 full-year: Jan–Nov average 699, Dec settled ~738.
The price history divides into five distinct episodes.
Price episodes
2015–2016: trough and supply-side reform
From the “golden decade” peak of approximately 850 RMB in 2011, prices declined for four consecutive years as capacity investments from 2002–2012 materialised into surplus. By late 2015, QHD spot hit 370 RMB/t — roughly equal to delivered cost for marginal producers. Industry-wide losses were widespread; the sector’s profit margin was -46.9% in 2015 (Thunder Said Energy, 2024a).
In January 2016, the State Council launched supply-side structural reform. The “276-day policy” (reducing working days from 330 to 276) removed approximately 300 Mt of effective capacity. H2 2016 averaged 503 RMB, up 34.6% from 373 RMB in H2 2015 (Qiu, 2020). By November 2016, spot exceeded 600 RMB, forcing the NDRC to partially relax the policy. Some 290 Mt of capacity closed in 2016 alone.
2017–2019: post-reform plateau
QHD settled into a 600–650 RMB range as the 276-day policy was rescinded but structural closures continued. The NDRC began informal “green zone” guidance, intervening when prices drifted above ~650 or below ~500. This period established the post-reform “normal” for Chinese domestic coal (National Development and Reform Commission, 2022b).
2021: energy crisis
Post-COVID industrial recovery drove coal demand up approximately 11% in H1 2021. Safety inspections in Shanxi, Inner Mongolia environmental audits, and the informal ban on Australian coal (from October 2020) constrained supply. QHD spot exploded: July ~950, September >1,200, and on October 19–20 hit 2,200–2,600 RMB/t — an all-time record (Oxford Institute for Energy Studies, 2022). The NDRC deployed emergency measures: anti-speculation crackdowns, forced production increases at state mines, and reserve releases. Spot collapsed from 2,600 to 660 RMB by early November — a 75% decline in two weeks.
2022: NDRC price cap
In February 2022, the NDRC gazetted a “reasonable range” of 570–770 RMB/t for QHD 5,500 kcal long-term contracts (National Development and Reform Commission, 2022b; South China Morning Post, 2022). The Ukraine-Russia war briefly pushed QHD to 1,700 RMB in March, but the cap anchored expectations thereafter. The annual average of ~1,150 RMB reflected the transition from crisis pricing to the regulated range.
2023–2025: normalisation and decline
Record domestic production (~4.7 Bt in 2023), resumed Australian imports, and slowing demand growth drove a steady price decline: 966 RMB (2023), 863 (2024), 699 (Jan–Nov 2025). By June 2025, QHD hit a four-year low of 610 RMB on mild winter demand and record coastal inventories (>66 Mt). H2 recovery to ~830 RMB followed on seasonal restocking and Shanxi safety inspections (SunSirs, 2026).
Long-term contract (changxie) mechanism
The NDRC set the annual changxie benchmark at 675 RMB/t with a +/-10% fluctuation band (approximately 607–743 RMB/t). This benchmark has been maintained unchanged for four consecutive years (2023–2026), and over 80% of coal producers’ volumes must be covered by long-term contracts (Benchmark Journal, 2026; National Development and Reform Commission, 2022a).
In 2025, the contract average (678 RMB) was only marginally below the spot average (699 RMB), indicating the system has successfully compressed the spot-contract spread. In 2021, by contrast, the spread exceeded 1,500 RMB at its peak.
Newcastle benchmark comparison
| Year | QHD 5,500 (RMB/t) | Newcastle 6,000 (US$/t) | QHD in US$/t | Ratio |
|---|---|---|---|---|
| 2015 | ~385 | 60 | ~55 | 0.92 |
| 2016 | ~480 | 65 | ~70 | 1.08 |
| 2017 | ~630 | 89 | ~93 | 1.04 |
| 2018 | ~640 | 107 | ~97 | 0.91 |
| 2019 | ~590 | 81 | ~85 | 1.05 |
| 2020 | ~560 | 61 | ~83 | 1.36 |
| 2021 | ~1,050 | 139 | ~163 | 1.17 |
| 2022 | ~1,150 | 351 | ~171 | 0.48 |
| 2023 | 966 | 172 | ~137 | 0.80 |
| 2024 | 863 | 137 | ~120 | 0.88 |
| 2025 | 699 | 109 | ~97 | 0.89 |
: Source: CEIC (QHD); Steel on the Net (Newcastle); International Energy Agency (2025a); International Energy Agency (2025b). QHD converted at annual average RMB/USD. Note: 5,500 kcal is ~92% of 6,000 kcal energy content; figures are raw price conversions without calorific adjustment.
Pre-2020, QHD in USD terms tracked Newcastle closely (ratio 0.9–1.1x), reflecting China’s role as the marginal seaborne importer. In 2022, the NDRC cap held domestic prices to just 48% of Newcastle — the widest divergence ever — as China was effectively insulated from the European energy crisis. Since 2023, the ratio has reconverged to ~0.85–0.90, with QHD trading at a persistent 10–15% discount to Newcastle on an energy-adjusted basis.
Import parity (2025): South China CFR 5,500 kcal averaged approximately US$83/t (IEA), or ~598 RMB — significantly below QHD spot of ~700 RMB. This implies a ~100 RMB/t domestic premium reflecting internal rail logistics costs and policy preference for supply security (International Energy Agency, 2025b).
Real price trend
Cumulative Chinese CPI inflation from 2015 to 2025 was approximately 16.5%.2 Adjusting the 2018 mid-cycle price of ~640 RMB to 2025 terms gives approximately 675 RMB — essentially equal to the 2025 average of ~700 RMB. Coal is roughly flat in real terms compared to the mid-cycle range, though significantly cheaper than the 2021–22 crisis period.
Price vs cost: margin compression
| Period | QHD price (RMB/t) | Delivered cost (RMB/t) | Margin (RMB/t) |
|---|---|---|---|
| Jun 2025 trough | 610 | ~600 | ~10 (breakeven) |
| 2025 average | 699 | ~600 | ~99 |
| Nov 2025 peak | 834 | ~620 | ~214 |
| 2024 average | 863 | ~580 | ~283 |
| 2023 average | 966 | ~560 | ~406 |
: Source: Author estimates based on Sxcoal (2025) and Thunder Said Energy (2024a). Delivered cost includes mine-mouth + Daqin rail (~100–120 RMB) + port handling (~25 RMB).
At the June 2025 QHD low of 610 RMB, the market was at or below delivered cost for average Shanxi producers. Sustained prices below 650 RMB would trigger capacity rationalisation among the highest-cost ~20% of producers (small underground mines in Shanxi, Guizhou and Henan with full-cycle delivered costs of 600–700 RMB/t). The NDRC’s changxie benchmark of 675 RMB implicitly signals this cost floor.
Forward outlook
| Source | 2026 QHD 5,500 forecast (RMB/t) |
|---|---|
| Bloomberg Intelligence | 660 |
| SunSirs | 700–900 range |
| Sxcoal (Fenwei) | ~720–750 (slight upward shift) |
| NDRC changxie benchmark | 675 (unchanged, 4th year) |
: Source: SunSirs (2026); Sxcoal (2025); Benchmark Journal (2026).
The consensus is for range-bound trading. Renewable displacement caps the upside (China added >300 GW of solar+wind in 2023–2025), while cost floors limit the downside. The IEA projects global coal demand on a “plateau at ~8.78 Bt” through 2026, with China’s thermal coal demand flat near 5 Bt (International Energy Agency, 2025a).
How Prices Can Fall While Costs Rise
A puzzle emerges from the preceding sections: production costs are rising structurally at approximately US$1.3/t per year (Thunder Said Energy, 2024a), yet the QHD spot price fell from 966 RMB (2023) to 699 RMB (Jan–Nov 2025) — a 28% decline in two years. The resolution lies in the interaction of four forces.
Deliberate supply expansion
The single largest factor. After the 2021 energy crisis, the government’s overriding priority became “never again.” Domestic output surged from approximately 4.1 Bt in 2021 to 4.7 Bt in 2023 and approximately 4.9 Bt in 2025 — a 20% increase in four years (Global Energy Monitor, 2024; International Energy Agency, 2024). This volume growth overwhelmed the cost escalation because the new capacity was disproportionately concentrated in large, efficient mines in Inner Mongolia and Shaanxi — the low-cost end of the supply curve. Average costs rose, but the marginal tonne of new supply was cheaper than the tonnes it displaced from the high-cost tail.
Import competition sets the coastal margin
Indonesian thermal coal lands in South China at approximately US$35/t CFR (~252 RMB) including royalties and freight — less than half the QHD domestic price (International Energy Agency, 2025a). Australian coal at approximately US$83/t CFR (~598 RMB) is also well below QHD. When the informal ban on Australian coal was lifted in early 2023, total imports surged from 323 Mt (2021) to 474 Mt (2023) to 543 Mt (2024) (General Administration of Customs of China, 2026).
For any coastal generator with port access, the import option caps the domestic price. The persistent ~100 RMB domestic premium over South China import parity reflects the cost of rail logistics from Shanxi and Inner Mongolia to the coast — Indonesian coal arrives by ship, while Shanxi coal must travel 650 km by rail on the Daqin line (China Coal International, 2024). Imports therefore function as the price-setter at the margin for coastal demand, disciplining the domestic market from above.
The NDRC changxie system is de facto price regulation
The most distinctive feature of the Chinese coal market is that it is neither a free market nor a fully administered one. The NDRC’s changxie (long-term contract) system mandates that over 80% of coal producer volumes be covered by long-term contracts at or near the 675 RMB/t benchmark (Global Times, 2022; National Development and Reform Commission, 2022a). This benchmark has been held unchanged for four consecutive years (2023–2026) despite cumulative cost increases of approximately 36 RMB/t over that period (Benchmark Journal, 2026).
The effect is to compress miner margins in favour of generator solvency. Spot trading covers only the remaining 15–20% of volumes, serving as a marginal price signal rather than the primary price-setting mechanism. In 2025, the contract average (678 RMB) was only marginally below the spot average (699 RMB), indicating that the system has successfully compressed the spot-contract spread — which exceeded 1,500 RMB at the peak of the 2021 crisis.
The 570–770 RMB “reasonable range” functions as a corridor: a floor that prevents prices from falling far enough to trigger disorderly mine closures, and a ceiling that prevents generators from being squeezed back into losses. Within this corridor, market forces operate. Outside it, administrative intervention is swift and decisive — as demonstrated by the 75% price collapse in two weeks during October–November 2021.
Demand softened from the renewable surge
Coal plant utilization fell to an all-time low of 4,628 hours nationally (~53% capacity factor) in 2024 (International Energy Agency, 2024). China added over 300 GW of solar and wind capacity in 2023–2025, and in 2025, thermal power generation declined for the first time in several years as renewables captured the incremental kilowatt-hour (International Energy Agency, 2025a). When generators need less coal because wind and solar are serving more of the load, the bidding pressure on spot markets eases.
The net result: margin compression, not market failure
These four forces explain why the price can fall while costs rise: the government is deliberately expanding low-cost supply, opening the market to cheap imports, administratively capping contract prices, and allowing renewables to erode coal demand at the margin. The cost of this policy is borne by coal miners through margin compression. Total coal industry profits fell 22% in 2024 (Sxcoal, 2025).
This is sustainable for now because the large state miners remain profitable — China Shenhua’s mine-mouth cost of 179 RMB/t leaves ample margin even at 675 RMB contract prices (Futunn, 2024). But the high-cost tail of small mines is being slowly killed, which is arguably the policy intent. China’s mine count has consolidated from 64,000 in 1997 to approximately 4,500 by 2024 (Global Energy Monitor, 2024). The government is effectively using price policy to accelerate this consolidation: squeeze margins, let the weakest exit, and concentrate production in fewer, larger, more efficient operations.
The binding constraint is visible in the data. At the June 2025 QHD low of 610 RMB, average Shanxi producers were at breakeven. The price bounced hard to 830 RMB within five months (SunSirs, 2026). The cost floor is real, and the NDRC’s 675 benchmark implicitly acknowledges where it sits. Prices can fall to the cost floor — but not through it for long.
Big 5 State Generators
China’s electricity sector is dominated by five state-owned generation groups, each with Hong Kong- and/or Shanghai-listed subsidiaries that provide financial transparency.3
On-grid tariffs achieved (2024)
| Company (listed arm) | 2024 tariff (RMB/MWh) | A$/MWh | YoY change |
|---|---|---|---|
| Huadian Power (600027) | 512 | 114 | -1.0% |
| Huaneng Power (600011) | 494 | 110 | -2.9% |
| Datang Power (601991) | 451 | 100 | -3.2% |
| Guodian Power (600795) | 430 | 96 | -6.8% |
| China Shenhua (601088) | 403 | 90 | -2.7% |
: Source: 2024 annual reports and HKEX filings via TipRanks (2025d); TipRanks (2025b); TipRanks (2025c); China Power News Network (2025); TipRanks (2025a).
Tariffs declined 1–7% across the board as lower coal costs flowed through to market-based pricing. Approximately 87% of power is now traded on spot/contract markets rather than at administered benchmark tariffs (Sina Finance, 2025b). Coal-fired on-grid tariffs can float up to 20% above or below provincial benchmarks — Huaneng reported its coal tariff was 13.25% above benchmark in 2024.
Tariffs by fuel type
Huaneng Power provides a useful breakdown (GuruFocus, 2024):
| Fuel type | RMB/MWh | A$/MWh |
|---|---|---|
| Biomass | 749 | 166 |
| Gas-fired | 712 | 158 |
| Wind | 519 | 115 |
| Coal-fired | 446 | 99 |
| Solar | 430 | 96 |
| Hydro | 361 | 80 |
: Source: Huaneng Power Q3 2024 earnings call (GuruFocus, 2024).
The coal-fired tariff of approximately A$99/MWh is broadly comparable to the Australian NEM wholesale price range of A$80–120/MWh (varying by state and year), though the Chinese figure includes a new capacity payment component.
Capacity payments
From 1 January 2024, China restructured coal power pricing into capacity tariff + energy price. The capacity payment (100–165 RMB/kW-year depending on province, i.e. A$22–37/kW-year) converted approximately 5–10% of a coal generator’s revenue into a fixed capacity charge (Carbon Brief, 2024). This was designed to ensure coal plants remain viable as their utilization hours decline.
Revenue and profitability
| Company | Revenue (RMB bn) | Net profit (RMB bn) | A$ bn | YoY | Net margin |
|---|---|---|---|---|---|
| China Shenhua | 338.4 | 58.7 | 13.0 | -2% | 17.3% |
| Huaneng Power | 245.6 | 10.1 | 2.3 | +20% | 4.1% |
| Guodian Power | 179.2 | 9.8 | 2.2 | +75% | 5.5% |
| Datang Power | 123.5 | 4.5 | 1.0 | +230% | 3.6% |
| Huadian Power | 113.0 | 5.7 | 1.3 | +26% | 5.0% |
: Source: 2024 annual reports via Yicai Global (2025); ESCN (2025); Sina Finance (2025a).
The profit recovery was driven by fuel costs falling 7–11% while tariffs fell only 1–7% — creating margin expansion despite revenue declines. However:
- Net margins of 3–5% for pure-play generators are thin and structurally vulnerable to coal price spikes
- Shenhua is the outlier at 17% margin because its integrated coal mining business captures the mining profit internally (self-produced coal margin: 44.5%)
- Datang’s +230% profit growth reflects a low base (RMB 1.4 bn in 2023) rather than exceptional performance
Segment profitability
Huaneng Power’s segment disclosure illustrates the volatility (Sina Finance, 2025b):
| Segment | 2024 | 2023 | Change |
|---|---|---|---|
| Coal-fired | 7.1 | 0.4 | +1,548% |
| Wind | 6.8 | 5.9 | +15% |
| Solar | 2.7 | 2.0 | +33% |
| Gas-fired | 1.1 | 0.8 | +40% |
: Source: Huaneng Power 2024 annual report via Sina Finance (2025b).
Coal-fired generation swung from near-breakeven to the largest profit segment in a single year. This extreme volatility is characteristic of the sector — Datang’s coal segment swung from a RMB 133 million loss in 2023 to a RMB 2.6 billion profit in 2024 (TipRanks, 2025b).
Fuel costs and efficiency
| Company | Fuel cost (RMB/MWh) | A$/MWh | YoY | Coal rate (g/kWh) |
|---|---|---|---|---|
| Datang Power | 273 | 61 | -7.1% | n/a |
| Guodian Power | ~285 | 63 | ~-7% | 293.4 |
| Huadian Power | ~296 | 66 | -6.5% | 287.5 |
| Huaneng Power | 300 | 67 | -8.0% | 293.5 |
| China Shenhua | 357 | 79 | -1.6% | 292.9 |
: Source: 2024 annual reports via TipRanks (2025b); China Power News Network (2025); TipRanks (2025c); GuruFocus (2024); TipRanks (2025a). Shenhua’s higher figure reflects internal transfer pricing that captures profit in the coal segment.
Standard coal consumption rates of 287–294 g/kWh are improving at approximately 2 g/kWh per year as older subcritical units are retired and ultra-supercritical units are added (Energy Foundation China, 2023). The policy target for new builds is below 270 g/kWh.
Generation mix and utilization
| Company | Total | Coal | Gas | Hydro | Wind | Solar | Clean share |
|---|---|---|---|---|---|---|---|
| Huaneng Power | 145 | 93 | – | – | 18 | 20 | 36% |
| Guodian Power | 112 | 75 | – | – | 10 | 12 | 33% |
| Datang Power | 79 | 47 | 7 | 9 | 10 | 6 | 40% |
| Huadian Power | 60 | 47 | 9 | – | 2 | 2 | 22% |
| China Shenhua | 46 | 43 | 2 | – | – | 1 | ~2% |
| SPIC (group total) | 260 | – | – | – | – | – | 73% |
: Source: 2024 annual reports via TipRanks (2025d); TipRanks (2025b); TipRanks (2025c); TipRanks (2025a); BJX News (2025); China Energy News (2025).
Coal plant utilization hit an all-time low of 4,628 hours nationally (~53% capacity factor) in 2024 (International Energy Agency, 2024). This structural decline will continue as renewable capacity grows — Huaneng alone added 9.4 GW of wind and solar in 2024 (TipRanks, 2025d).
Implications
Declining quality inflates headline production figures
When average CV falls, more physical tonnes are needed per unit of useful energy. China’s headline production of ~4.9 Bt overstates the energy content relative to historical norms. This has implications for transport infrastructure loading, emissions intensity per unit of useful energy, and the accuracy of standard coal conversion factors used in international comparisons.
The cost floor is rising
Structural cost escalation of ~US$1.3/t per year means that even if demand plateaus, prices cannot fall much below current levels without triggering mine closures. The NDRC’s 570–770 yuan/t guidance range implicitly acknowledges this cost floor (National Development and Reform Commission, 2022b).
Generator margins are a thin buffer
At 3–5% net margins, the Big 5 generators are one coal price spike away from returning to losses. The 2021 experience — when Datang and Huadian reported billions in losses — demonstrated how quickly the sector can swing. The new capacity payment mechanism provides a partial buffer but covers only 5–10% of revenue.
ITK Claude assisted Research, February 2026
References
Footnotes
The NBS standard coal equivalent (SCE) conversion factor for raw coal is 0.7143 kgce/kg, implying an assumed average CV of ~5,000 kcal/kg.↩︎
Compounding annual CPI: 1.4%, 2.0%, 1.6%, 2.1%, 2.9%, 2.5%, 0.9%, 2.0%, 0.2%, 0.2%, 0.0% (2015–2025).↩︎
The Big 5 are: China Huaneng Group, China Datang Corporation, China Huadian Corporation, State Power Investment Corporation (SPIC), and China Energy Investment Corporation (CHN Energy, the 2017 merger of Guodian and Shenhua).↩︎