China's Hydropower Revival: Implications for Fossil Fuel Import Demand

China has faced lower-than-normal hydropower output over the past two years due to drought conditions in several key river basins like the Yangtze. Rainfall levels have been deficient, leading to depleted reservoir levels at major hydroelectric dam projects. To make up for this hydropower deficit, the country has been forced to ramp up generation from fossil fuel sources like coal and natural gas power plants.

However, 2024 is shaping up differently. Chinese hydropower production surged to 83.5 TWh in April, an increase of 12.3 TWh compared to the previous month and a 15.1 TWh increase compared to the same month last year. Chinese hydropower production is now back in line with the 5-year range.

Last year, demand for power grew from 658 TWh in April to 845 TWh, and DBX expects a similar trajectory for 2024. However, more robust hydropower generation and strong growth in wind power generation are likely to bring thermal power production below last year's levels, which will likely weigh on thermal coal and LNG imports for the balance of the year.

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