China coal demand broadens beyond power as conversion projects expand

By Romel S. Gurky

China’s coal market is showing signs of structural change, with demand increasingly driven by conversion into gas and chemicals rather than power generation alone, according to analysis by DBX Commodities.

The report said coal-to-gas development is accelerating, with up to 13 large-scale gasification projects under development. One of the projects, a US$3.7 billion facility in Liaoning, is expected to come online by October 2026. Collectively, these projects could supply around 12% of China’s current gas demand, linking coal consumption more directly to the gas market and reducing reliance on imported liquefied natural gas.

Coal-to-chemicals is also expanding, supported by higher oil prices. With crude prices rising more than 30% since late February, coal-based chemical production has become more competitive. Coal use in this segment increased by 11.5% last year to about 362 million tonnes, with additional capacity under development.

Read also: China coal prices firm as output rises amid stable demand

The shift is being driven in part by energy security concerns, as supply disruptions in the Middle East have prompted China to reduce dependence on imported fuels and rely more on domestic resources.

At the same time, overall coal fundamentals remain strong. April production is estimated at around 426 million tonnes, the highest level for the month in five years, while thermal power generation reached approximately 540.6 terawatt-hours in March, also a five-year high.

The thermal coal market remained in surplus during the first quarter of 2026, indicating stable supply conditions despite rising demand in new segments.

Analysts said the diversification of coal use into gas and chemical feedstocks points to a longer-term shift in demand patterns, with coal increasingly positioned as a strategic domestic resource beyond its traditional role in power generation.

Editing by Alexander Ginting