China coal prices scored a record high

China coal prices scored a record high

China’s thermal coal prices rose to new record highs on Wednesday as recent floods in key coal-producing province Shanxi worsened a supply crisis, just as further attempts by Beijing to improve power prices increased demand from power generators.

China is the world’s biggest coal consumer. It has been fighting with a growing energy crisis brought on by deficiencies and record-high prices for fuel. The government has taken several steps to increase coal production and distribute electricity demand at industrial plants. Meanwhile, power producers and other coal users have been ramping up imports.

Local governments in top coal producers Shanxi and Inner Mongolia have required some 200 mines to raise production. However, persistent rain flooded 60 mines in Shanxi. Four mines with a consolidated yearly production capacity of 4.8 million tonnes remained closed. A Shanxi official said a press conference on Tuesday.

The most active January Zhengzhou thermal coal futures reached a record high of 1,640 yuan ($254.44) by tonne earlier in the Wednesday trade, rising nearly three-fold year-to-date.

Data published on Wednesday also revealed that coal imports increased to their highest last month as users struggled to overcome supply constraints.

In September, China took in 32.88 million tonnes of coal. It went up 76% from a year beforehand, data from the General Administration of Customs revealed on Wednesday. The monthly sum was the fifth-biggest on record, as stated by Reuters calculations.

Reuters announced last week that China has been clearing Australian coal from bonded storage but hasn’t raised an almost year-long, unofficial import ban on the fuel.


Other suppliers have reduced exports

Exports from other key suppliers, like Russia and Mongolia, have been reduced by limited rail capacity. In contrast, shipments from Indonesia have been delayed by rainy weather, traders stated.

Power plants also attempt to diversify coal sources from niche markets like Kazakhstan.

China’s Premier Li Keqiang had an online meeting with Mongolian Prime Minister Oyun-Erdene Luvsannamsrai. He said he would be glad to see an expansion in the size of coal traded between the two countries Xinhua news agency reported late on Tuesday.

The increase in prices and coal import data appears a day following Beijing’s announcement it would allow power plants to charge commercial customers market-based fees for power, in a notable break from previous policy that enabled the industry to lock in fixed-price power deals with suppliers.

The policy shift should encourage more coal-fired power generation. Hence, it is the newest in a raft of measures that should ease the power supply crunch. It has driven several industry sectors in China to curb power practice in recent weeks.

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