James Stephens
China's coking coal futures have surged 46% in August, the biggest monthly jump since Dalian Commodity Exchange contracts for the steelmaking material began trading in 2013. The rally underscores how a single mine disaster and a wave of safety inspections can upend a market that steel producers across Asia depend on for their most essential raw input.
China Coking Coal Futures Post a Record Monthly Climb
On Monday afternoon in China, coking coal futures on the Dalian exchange were up another 6%, extending a month that has already rewritten the record books. Data compiled by Bloomberg shows the 46% gain topping the previous high water mark of 38%, set just last month in July 2025. That two month stretch of back to back records points to a market struggling to find its footing after a string of supply shocks.
The immediate trigger traces back to May, when a mining disaster disrupted operations and prompted regulators to tighten safety checks across other Chinese mines. Those inspections have kept output constrained even as demand for steelmaking inputs has stayed firm, leaving buyers to compete for a shrinking pool of available coking coal.
A Deadly Accident in Shanxi Adds to the Squeeze
More than 80 workers died in a coal mine explosion in China's Shanxi province, one of the deadliest mining accidents the country has seen in years. Beyond the human toll, the disaster triggered broader safety scrutiny that has slowed production at mines well beyond the site itself, compounding an already tight supply picture.
Other factors have piled on. New mine capacity has been slow to ramp up, the conflict involving Iran has added to global energy price pressures, and Australia, a dominant supplier of premium coking coal, has faced its own string of supply disruptions. Australian premium coking coal priced on a freight on board basis climbed 25% over the first seven months of this year compared with the same period last year.
Metallurgical coal differs from the thermal coal burned for electricity: it carries more carbon and less ash and moisture, qualities that make it indispensable for smelting steel. That narrow, specialized role means there are few easy substitutes when supply tightens, which helps explain why prices can move so sharply in such a short window.
India Feels the Pinch as Import Costs Climb
India, the world's second largest steel producer behind China, imports as much as 95% of its coking coal needs. Steelmakers there have watched margins compress as input costs climb, a squeeze that mining giant BHP flagged directly in its economic and commodity outlook released earlier this month. The company noted that steelmaking coal prices firmed from prior year levels as robust Indian import demand collided with supply disruptions in what had otherwise been a balanced seaborne market.
That combination, strong demand out of India and constrained output from Australia and China, has left little slack in the global system. With Chinese mine safety checks showing no sign of easing and geopolitical friction tied to Iran still simmering, the steelmaking coal market looks set to stay volatile in the near term.
Frequently Asked Questions
Why does China use coal?
China relies on coal for the bulk of its electricity generation and as the primary raw material for steelmaking, given its large domestic coal reserves and the scale of its industrial and power sectors.
Is China still using coal?
Yes, coal remains central to China's energy mix and its steel industry, and the country continues to mine, import and consume large volumes of both thermal and coking coal.
Will China stop using coal?
China has not set a timeline to stop using coal; it continues to invest in coal mining safety and supply even while expanding renewable energy and nuclear power capacity alongside it.
Why is China still using coal?
Coal remains the most affordable and abundant domestic energy source available at the scale China's power grid and steel mills require, making a rapid full exit impractical in the near term.
Holly Herrera
Jake Fox