China's raw coal output hit the second highest level of the year in December, despite lackluster demand and regulatory headwinds, defying expectations that domestic coal output could contract as miners nearly completed their annual production targets.

The latest NBS data showed China produced 437.03 million tonnes of coal last month, down 1.0% year on year but up 2.4% month on month. This marked the sixth consecutive month of year-on-year decline since June 2025, although it simultaneously reflected a second straight monthly increase. It was only slightly lower than this year's peak in March.

December falls within the winter peak demand season, with temperatures continuing to drop and demand steadily increasing. The energy supply guarantee also kept long-term supply agreements at a high level. While safety, environmental and overproduction checks still existed, these factors became more routine, especially overproduction checks served more as deterrents.

Regarding the annual production target, coal miners generally follow a clear schedule, with yearly targets broken down by month. Even if some mines finish early, the quantity is limited and has a minor impact on overall supply.

However, from the perspective of daily production, the daily output in December averaged 14.1 million tonnes, a decrease of 0.9% compared to November's 14.23 million tonnes, and 0.4% lower than 14.16 million tonnes in December 2024.

The month-on-month increase in total production was more due to the additional day in the month. In fact, December's supply somewhat tightened.

With warmer-than-usual temperatures and a slowdown in industrial growth, the increase in demand was limited, leading to poor coal sales.

In January, temperatures remained relatively high in the first half. Cold wave in the second half is expected to cause sharp drop in temperatures across most of the country.

However, coal demand is expected to remain limited by power plants' high coal inventories. Since the Chinese New Year arrives in the second half of February this year compared to last year's in January, total coal production is likely to see a yearly growth in January.

Data also showed that China's annual raw coal production in 2025 reached 4.83 billion tonnes, a 1.2% year-on-year increase. Even though the growth rate declined since the third quarter, total production still reached a record high.

Looking ahead to 2026, although domestic coal production growth is expected to slow down, overall supply is expected to remain abundant.