Maria Bertzeletou: In our first episode, we look at the bauxite and aluminium supply chain. In the second, we move from raw materials to agriculture and food security. Today, we return to energy through coal. The link between these markets is China. This summer, with disruption around our moves, sharpening Asia's focus on energy security, The role of coal has become harder to overlook. China is expanding renewables at extraordinary speed. But coal continues to underpin its power system. In the first half of this year, renewables supply around 40 % of China's electricity, while coal still accounted for close to 50%. China also consumes around 30 % more of the rest of the world combined. In July, coal imports rose by around 23 % to the highest monthly level of the year, even as thermal generation fell by approximately 4%. explanation lies in domestic production, inventories, and import prices, and how these factors shaped China's demand for seaborne coal I'm Maria Bertzeletou, Senior Market Analyst at Signal Research and joining me today is my colleague Esther Chua, Senior Dry Bulk Analyst. Esther, let's start with a big picture. What's the one thing you think the market keeps getting wrong about Chinese coal?

Esther Chua: I think it's treating coal imports as a direct read on coal demand. China produces most of the coal it uses domestically. So imports are really the balancing tons, especially for the coastal buyers. For the seaborne market, what is important is the gap between what China needs and what its domestic mines can supply.

Maria Bertzeletou: How sensitive are import volumes to changes in China's domestic production?

Esther Chua: Because the domestic market is so large, a very small change in productions can create a bigger swing in imports. And July is a very good example of exactly that.

Maria Bertzeletou: Interesting. Let's look at what's changed in domestic production. What happened to the mines?

Esther Chua: So China came into 2026 with higher domestic supply. Productions had been very strong, so imported thermal coal was slow at the start of the year. Then the fatal mining accident happened in Shanxi in May, causing tighter safety inspections. Since then domestic production started to reduce.

Maria Bertzeletou: Do you have any good evidence on how far did production fall?

Esther Chua: Raw coal productions fell 9.7% in June and 10.1% in July to around 340 million tons. The more important figure is the 2.9% year-to-date decline. That may sound insignificant, but against China's enormous production space. It represents a substantial physical volume.

Maria Bertzeletou: And now this brings us to a critical question for you Esther. Did coastal buyers replace all of that lost production with imports?

Esther Chua: coastal buyers did not need to replace the entire shortfall with imports. The key question was whether lower domestic supply would reduce stocks and push local prices high enough to make imported coal attractive again.

Maria Bertzeletou: And we can see that trend clearly in the customs data. China imported around 44 million tons of coal in July, up 20%. And this is the highest monthly total of the year. What makes July interesting is that electricity generation was largely unchanged. Thermal output fell by around 4%, while Hydro and Nuclear rose by around 7 % and wind and solar by around 5%. Esther, how should we read the recent rise in imports alongside weaker thermal generation?

Esther Chua: Not described July's import increase as a demand surge. China was not suddenly burning much more coal. China had less domestic coal available. So coastal buyers replaced part of the missing supply with imports. The change came from the supply side, while power demand remained fairly soft.

Maria Bertzeletou: Is that likely to be temporary are we looking at a longer shift?

Esther Chua: I would not call it permanent yet. The first trigger was quite specific. The title Safety Inspections and lower mine output If production normalizes, some of that replacement buying should unwind.

Maria Bertzeletou: What happens if production takes longer to recover?

Esther Chua: I would watch how quickly production recovers in the fourth quarter. If mine output remains low, stocks remain tight, and domestic prices stay firm, imports could remain supported for longer than the market first expected.

Maria Bertzeletou: Beyond mine supply, what else do you believe should we be watching?

Esther Chua: Hydropower is also important. When hydrogeneration is strong, thermal plants do not need to work as hard, limiting import requirements. So I would assess mine supply and the power generations balance together.

Maria Bertzeletou: Have we seen any of that pressure since July?

Esther Chua: not fully, domestic prices moved higher, mine recovery remained slow in some areas, and weather continued to disrupt mining and transport. This provided some near term support for imports.

Maria Bertzeletou: Interesting, let's go back to price. By late August, we have some indication about benchmark price for 5,500 kilo calorie, thermal coal at Qinhuangdao had risen to around 121 ton. Prices for Indonesian and Australian cargos has also moved higher. Esther, what does the price movement tell us about China's appetite for imported coal?

Esther Chua: It tells me the market remains responsive. When the domestic supply tightens, import buying can return fast. But if mine output recovers and domestic prices falls, that support can also disappear quickly.

Maria Bertzeletou: What determines whether an important cargo is competitive? What do you believe on this front?

Esther Chua: The landed economics, Indonesia's low caloric value coal has an advantage because it is close to China. It is relatively inexpensive to deliver the coastal power plants. Australian 5500 kilocalorie coal is more competitive. When Chinese domestic prices rise far enough to narrow the gap. When that happens, China's sourcing mix can change, even if its total requirement does not move much.

Maria Bertzeletou: Now we have reached the perfect point to see our voyage data indications. Seabourn thermal coal arrivals fell by 13.5 % between January and May. However, the rebound in June and July narrowed the seven-month decline to around 5%. Why does that picture differ from the customs state?

Esther Chua: The two data sets measuring different things. Customs data covers all coal types, including overland imports, while our series measures seaborne thermal coal. For shipping, the seaborne series gives us more direct indications of cargo demand and vessels employment.

Maria Bertzeletou: Now let's turn to what this means for the fleet. Import volume is only part of the picture. Where the coal comes from and how far it travels determines how much vessel capacity it absorbs. Esther, how does the shipping impact differ between coal from Indonesia and Australia?

Esther Chua: Look at it as volume versus vessel days. Indonesia supplies most of China's Panamax thermal coal volume because it is nearby and produces the low CV coal used by coastal buyers. Last year, Indonesia accounted for around 69% of the volume, but only about 52% of the tonne miles. Australia contributed less than 18% percent of the volume, but roughly thirty two percent of the tonne miles

Maria Bertzeletou: Esther, where do you believe with the market feel a shift in sourcing first?

Esther Chua: The Pacific vessel list Indonesian voyage is shorter, so vessels return to the market relatively fast. Australian voyage keeps the vessels occupied for a longer time. A change in sourcing can begin tightening vessels availability, but it becomes obvious in the headline import figures.

Maria Bertzeletou: And is that shift actually likely or are we on thought experiment territory?

Esther Chua: This shift is not only theoretical. Indonesia faces limits from mining quotas, weather, and barge availability. Australian coal is more sensitive to relative price. If Indonesia's supply tightens while Chinese domestic prices remain firm, Australian material becomes more competitive. And the tonne-mile effect can strengthen quite fast.

Maria Bertzeletou: Let's bring now this back to the fleet. Based on our figures, Panama carried around 216 million tonnes last year, accounting for around 66 % of China's seaborne thermal coal trade. This year, the change is more visible in tonne miles from January through July. Panamax volumes reach around 150 million tons, up 4 % while ton-mile demand rose by 10 % to around 318 million. Esther, why has tonne-mile demand grown so much faster than volume?

Esther Chua: The gap between those two growth rates matters more than either number on its own. The tanks are only modestly higher, but the ships are doing considerably more work. That's why Panamax is the clearest place to see the sourcing shift come through.

Maria Bertzeletou: That supports panamax employment, but it doesn't automatically translate into higher freight. Coal is only one part of the market. Grain, minerals, competition between basins and vessel supply also shape the freight rate outcome, right?

Esther Chua: Agreed. And what I would look at next is whether those extra vessel days are genuinely tightening the Pacific list. Longer voyage absorb more ships, but if the position list is still long, tonne-mile demand can rise without freight following.

Maria Bertzeletou: And if China's import demand strengthens again, what would you watch first? The cargo book, ballasters or freight?

Esther Chua: Cargo activity and positioning first. More Indonesian inquiry provides employment for Pacific Panamaxes. But those vessels return to the market relatively quickly. Australian cargoes keep the ships busy for longer and delay their next available date. So I would not only count the additional cargoes, I would also look at how long each cargo removes a ship from the vessel list.

Maria Bertzeletou: Before we close this episode, Esther, what are you watching from here?

Esther Chua: First, domestic mine output, not only whether production recovers, but how quickly and in which areas. Second, the power balance, demand, hydropower, and renewable generations. This tells us how much thermal generations China needs each month. The third, the Indonesia-Australia split.

Maria Bertzeletou: And from my side, I will add Pacific Panamax positioning. Cargo growth begins to matter when ships are being absorbed faster than the tonnage list can refill. With that in mind, what's your view heading into the fourth quarter?

Esther Chua: I am reasonably constructive on Panamax employment, but more cautious about the headline import volume. If domestic mine productions returns to normal, some of the summer import strengths should fall. But tonne-mile demand may not fall by the same amount. If Australia keeps a larger share of the sourcing mix, vessels will remain employed for longer, even if total import ease That is the key point I would watch in the fourth quarter. Weaker import volumes do not always mean weaker Panamax employment.

Maria Bertzeletou: Esther, thank you

Esther Chua: Thanks, Maria.

Maria Bertzeletou: and thank you for watching Current Intelligence. We'll see you in our next episode.