After May Government Intervention Coal Prices Slump

China’s thermal coal futures fell on Friday. They returned in their most critical week in five months. They followed Beijing’s most robust intervention in years to increase the commodity’s supply. This would cool runaway prices amid a widespread power crisis.

The most-traded contract on Zhengzhou Commodity Exchange, for delivery in January, scored the lower daily trading limit of 14%. It ended at 1,408.4 yuan ($220) per tonne.

That was almost 30% under a record high score on Tuesday. It went down nearly 15% for the week, the most significant weekly drop after May.

Coking coal was under 11%, and coke futures dropped 9% on the Dalian Commodity Exchange, prolonging losses from previous sessions.

China has been pushing coal miners to ramp up production and hiking imports. Hence the power stations will be able to repair stockpiles before the winter heating season. However, analysts state shortages are likely to endure for at least another few months.

China’s state planner, National Development and Reform Commission (NDRC), has placed out several statements after Tuesday night that it studied ways to guide prices back to a reasonable range and break down on “excessive profits” at coal firms.

China’s securities regulator has stated it would ask futures exchanges to increase fees, restrict trading quotas, and gradually reduce coal price speculation.

The NDRC has gathered that the unbridled soaring of coal prices is somewhat driven by those wishing to hit the jackpot by taking advantage of the power supply dropping short of actual need, Chinese state media outlet China Daily wrote on Thursday.

Wait and See

Spot coal prices also caught the brakes after a week of daily progress as some of China’s major coal producers promised to cap thermal coal prices in the winter and next spring. Critical coal-carrying ports such as Qinhuangdao have also promised not to increase costs.

China’s coal production is increasing following some 153 mines received approvals to expand capacity. As of this week, daily production developed 4% from a month ago to 11.6 million tonnes.

China’s second-biggest mining region, Inner Mongolia, anticipates its 2021 coal production to surpass 1.05 billion tonnes, state media Workers’ Daily reported, quoting an Inner Mongolia conference. This would be higher from 1 billion in 2020, according to National Bureau of Statistics data.

But traders and power plants are catching a wait-and-see approach.