LAUNCESTON - China's coal imports surged to the highest this year in July but the strength is deceiving and built on short-term factors that are unlikely to persist.

Total coal imports rose 23% in July from the same month last year to 43.73-million tons, according to official data released last week.

This was up from 42.78-million tons in June and almost a third more than the low so far this year of 33.1-million tons from April.

The rebound in coal imports comes after China imposed safety inspections at mines after an accident left 82 people dead at a mine in Shanxi province on May 22.

Safety inspections have a track record of lowering output in the world's biggest coal producer, meaning China turns to imports to make up for any shortfall.

Domestic coal production fell 9.7% in June from the same month a year earlier to 380.8-million tons, with average daily output of 12.7-million tons being the lowest since July 2025, according to official data.

It's likely that production was also constrained in July, with official data expected next week, but reports from China-based analysts suggest output in August should be close to the same level as it was in 2025.

This suggests that China's need for imported coal may start to ease from August onwards.

A factor to consider is that China receives imports from two main sources, the seaborne market and overland from neighbours, mainly Mongolia but also some volumes from Russia.

Seaborne coal imports account for about 75% of the total, but this share has been trending lower in recent years as more coal is sourced from Mongolia, especially metallurgical coal used to make steel.

China's August seaborne imports of all coal types are estimated at 31.23-million tons by analysts DBX Commodities, down from 33.91-million in July and the first decline in four months.

The August figure is still subject to revision as more cargoes are assessed, but the end result is likely to be that August seaborne imports will be below July's, indicating that China's need for imports is easing as safety inspections taper.

PRICE EASES

Seaborne coal prices have started to flatten out after rising as China imported more in June and July.

Indonesia is the world's biggest coal exporter and top supplier to China and the price of 4 200 kilocalorie per kilogram (kcal/kg) fuel, a grade popular with Chinese buyers, was assessed by commodity price reporting agency Argus at $62.51 a ton in the week to August 7.

This was slightly down from the monthly assessment of $61.77 a ton for July, but 5.1% below the $65.89 for June.

The outlook for China's coal imports and seaborne prices is also tied to electricity demand.

China's thermal power production rose 2.9% in the first six months of 2026 from a year earlier, according to official data.

Thermal generation is overwhelmingly from coal with a small amount from natural gas and while it has been increasing, its share of total generation is declining as China continues to rapidly add wind and solar power.

China generated less than 50% of its electricity from fossil fuels in the first half of the year, the first time this has happened, with government data showing thermal power accounted for 49.7% of the total.

While solar installations have slowed with the scaling back of incentives, wind power additions are likely to ensure that China continues to see a greater share of electricity generation from renewable sources.

Over time this should result in lower coal imports, especially if China maintains domestic coal production at current levels.

This means that months like June and July, when coal imports were over 40-million tons, are more likely to become exceptions rather than the norm.