China’s Iron Ore and Coal Imports Plunge in January 2025—Market Shift or Warning Sign?

China’s Iron Ore and Coal Imports Decline in January, But Prices Tell a Different Story

As 2025 begins, China’s iron ore and coal markets are setting the tone for what could be a volatile year in the commodities sector. While both imports of iron ore and seaborne coal have declined to multi-month lows in January, the price trends for these key materials are telling two very different stories. Iron ore prices have remained remarkably resilient, while thermal coal has slumped to its lowest levels in nearly four years.

This divergence reflects a complex interplay of domestic production, seasonal factors, and global economic pressures. Understanding these dynamics is critical for businesses involved in raw materials, energy production, and manufacturing sectors globally. Let’s dive into the specifics of China’s import data, the forces driving price movements, and what these trends might mean for the global economy.

Iron Ore Imports Dip, But Prices Hold Firm

According to commodity analysts at Kpler, China—the world’s largest iron ore buyer—is expected to import 99.5 million metric tons of iron ore in January 2025. This marks a significant drop from the 112.5 million tons imported in December 2024, representing the lowest monthly total since June 2024, when imports stood at 97.61 million tons.

However, there’s an important caveat to this decline: seasonality. The Lunar New Year holidays, which this year fell at the end of January and into early February, typically slow down industrial activities as factories close for the week-long celebrations. This seasonal factor may have shifted some shipments from January into February, making the decline seem more pronounced than it truly is.

But despite the drop in imports, iron ore prices have shown remarkable resilience. Futures traded on the Singapore Exchange ended at $101.55 per ton on Wednesday, January 29th, climbing 4.4% from a recent low of $97.31 per ton on January 6th. This marks a significant show of strength, considering that the price has held above $100 per ton since October 2024, except for a brief dip earlier this month.

Why Are Iron Ore Prices Holding Up?

1. Stable Steel Demand: Despite a slight decline in steel output in 2024, China’s steel mills are still operating at relatively high capacity. The demand for steel remains robust, especially in infrastructure projects and manufacturing sectors, both of which continue to consume large amounts of iron ore.
2. Optimism Around Economic Stimulus: There is growing optimism among market participants that Beijing’s stimulus measures, aimed at stabilizing the property sector and boosting consumer demand, will begin to show results in 2025. This sentiment is providing support for iron ore prices, as a stabilized property sector typically drives demand for steel and construction materials.
3. Supply-Side Constraints: Disruptions from major exporters like Australia and Brazil, due to weather and logistical challenges, have tightened the global supply of iron ore. This reduced supply helps prop up prices, even when demand softens.
4. Global Trade Tensions: While the threat of a trade war with the newly inaugurated U.S. President Donald Trump looms, with potential tariffs of up to 60% on Chinese imports, the iron ore market seems to be shrugging off these risks for now. The market’s focus remains on China’s domestic policies and infrastructure spending.

Coal Imports Plunge, Dragging Prices Down

While iron ore has managed to weather the seasonal slowdown, China’s coal imports have seen a steeper decline, particularly in seaborne coal. Kpler estimates that China imported 27.97 million tons of seaborne coal in January, down 26% from 37.59 million tons in December. This represents a much sharper drop than in previous years, where declines of 9% in January 2024 and 10.9% in January 2023 were observed.

Customs data also showed that total coal imports, including overland shipments from countries like Mongolia and Russia, stood at 52.35 million tons in December. The significant January decline suggests that China may be increasingly relying on its domestic coal production to meet energy demands.

Factors Driving the Decline in Coal Imports

1. Seasonal Demand Shift: Historically, coal imports soften in January and February as peak winter heating demand passes. However, the 26% decline in January 2025 far exceeds the typical seasonal reduction, suggesting additional factors at play beyond just weather.
2. Rising Domestic Production: China’s domestic coal production surged in December 2024, reaching 439 million tons, a 4.2% increase from the previous year. Annual output for 2024 climbed 1.3% to 4.76 billion tons. This increase in domestic supply has reduced the need for imported coal, particularly from seaborne sources.
3. Weaker Domestic Prices: The robust increase in coal output has led to weaker domestic prices. According to consultants at SteelHome, thermal coal at Qinhuangdao was assessed at 765 yuan ($106) per ton this week, down 12.6% from the 2024 high of 875 yuan in September. This is the lowest price recorded since April 2021.
4. Global Price Impacts: The slump in China’s domestic coal prices is spilling over into the international market. Indonesian coal with an energy content of 4,200 kcal/kg was assessed at $48.76 per ton as of January 24th, the lowest price since April 2021 and down 16.2% from its 2024 peak in March. Similarly, Australian coal with 5,500 kcal/kg—a grade favored by Chinese buyers—was priced at $80.12 per ton, down 17.1% from its 2024 high and the lowest level since July 2021.

The Divergence: Why Iron Ore Holds While Coal Falls

The contrasting price movements of iron ore and coal highlight the complex dynamics of China’s industrial landscape and global commodity markets. Several factors explain why these two commodities are experiencing different trajectories despite both facing declining imports.

1. Demand Stability vs. Demand Volatility

Iron ore benefits from stable demand due to its critical role in steel production, which remains essential for infrastructure, manufacturing, and export markets. In contrast, coal demand is more volatile, heavily influenced by seasonal energy needs and China’s strategic moves to reduce reliance on imported fossil fuels.

2. Government Policy Influence

While China is investing heavily in renewable energy and attempting to reduce its carbon footprint, it still relies on coal for a significant portion of its energy production. However, domestic coal production policies and a focus on energy security have reduced the need for seaborne coal, dragging prices down. Conversely, government stimulus measures aimed at stabilizing the property sector are indirectly supporting iron ore demand and prices.

3. Global Market Sentiment

Iron ore markets are more influenced by global economic trends and investor sentiment around China’s growth prospects. Optimism about Beijing’s stimulus measures and infrastructure spending keeps iron ore prices buoyant. Coal markets, on the other hand, are more reactive to immediate supply and demand fundamentals, including domestic production surges and seasonal fluctuations.

Global Implications of China’s Commodity Trends

As the world’s largest consumer of both iron ore and coal, China’s import and pricing trends have significant ripple effects across global markets.

1. Impact on Steel Producers and Exporters

The resilience in iron ore prices is good news for steel producers worldwide. Stable raw material costs allow for better forecasting and margin management. However, if metallurgical coal prices (used in steelmaking) follow thermal coal’s downward trend, steel producers could see cost reductions, potentially impacting global steel prices.

2. Energy Markets and Climate Considerations

The slump in coal prices may be temporary as seasonal demand picks up again post-Lunar New Year. However, the longer-term trend suggests China is moving towards greater energy independence and potentially increasing its reliance on renewable energy sources, which could have far-reaching implications for the global coal market.

3. Geopolitical Risks

The looming threat of a trade war with the United States could disrupt global commodity flows. If the U.S. imposes steep tariffs on Chinese goods, it could impact industrial output, potentially reducing demand for raw materials like iron ore and coal. However, as of now, the market seems to be downplaying these risks, focusing instead on domestic factors within China.

Looking Ahead: What to Expect in 2025

As we move further into 2025, several factors will influence China’s iron ore and coal import trends:

1. Post-Lunar New Year Rebound: Historically, industrial activity picks up after the Lunar New Year, leading to increased demand for both iron ore and coal. This could result in a rebound in import volumes and potential price increases, particularly for iron ore.
2. Government Policy Shifts: Any changes in Chinese government policies regarding environmental regulations, infrastructure spending, or industrial production could significantly impact commodity demand and pricing. For example, stricter emissions targets could reduce coal demand, while increased infrastructure investment could boost steel production.
3. Global Supply Chain Stability: The resolution of supply chain disruptions in key exporting countries could affect the availability and pricing of iron ore and coal. Additionally, geopolitical developments, such as trade tensions or sanctions, could further influence import patterns.

Conclusion: Navigating the Road Ahead

China’s easing of iron ore and coal imports in January 2025 presents a complex landscape for global commodity markets. The divergence in price trends highlights the different forces at play in these two critical sectors. While iron ore remains resilient, buoyed by optimism around government stimulus and steady steel demand, coal faces headwinds from rising domestic production and weakening prices.

For businesses involved in steel production, energy generation, and raw material supply, understanding these dynamics is crucial for navigating 2025 and beyond. At Lux Metal, we provide industry insights and high-quality steel solutions to help our clients stay ahead in this ever-changing market.

For more insights into global commodity trends and how they affect your business, visit our website at Lux Metal.

References:

• China’s Iron Ore, Coal Imports Ease in January, Prices Diverge – Reuters
• China’s Coal Imports Hit Record High in 2024 – APBI-ICMA
• China’s Iron Ore and Coal Imports Ease in January But Prices Diverge – S&P Global