China has been focusing on national energy security for several decades. Power blackouts, soaring fuel prices, and heightened geopolitical tensions have brought national energy and steel security to the forefront of the Chinese government’s agenda, even as the country pursues a green transition.
A significant shift and increased emphasis on this issue happened in 2020 when China unveiled its Energy Security Strategy, further emphasizing the importance of diversified energy sources, enhancing domestic energy production, and strengthening the security of energy infrastructure.
Chinese coal and iron ore domestic mining production started to increase at a fast pace
Iron ore production rose from 55 million tonnes in February 2020 to 98 million tonnes in June 2022, and coal production rose from 244 million tonnes in February 2020 to 417 million tonnes in March 2023.
However, the rise in domestic production has now stopped, and there are even signs of a decrease in production. The reasons behind this are not entirely clear and could be related to mining capacity being maxed out.
Without adjusting for quality, China produces around 50% of the world’s coal production and 25% of the world’s iron ore production. This is potentially a key development for commodity fundamentals, which could support commodity prices remaining higher for longer.
Source: DBX Commodities
