HomeBusinessChina coal prices hit record high as floods add to supply woes

China coal prices hit record high as floods add to supply woes

Data released on Wednesday also showed coal imports rose to their highest this year last month as users scrambled to overcome supply constraints.

China’s thermal coal prices surged to fresh record highs on Wednesday, October 13, 2021, as recent floods in key coal producing province Shanxi worsened a supply crunch, just as new efforts by Beijing to liberalise power prices boosted demand from power generators.

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China, the world’s largest coal consumer, has been grappling with a growing energy crisis brought on by shortages and record high prices for the fuel. The government has taken a range of steps to boost coal production and manage electricity demand at industrial plants, while power producers and other coal users have been ramping up imports.

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Local governments in top coal producers Shanxi and Inner Mongolia have ordered some 200 mines to boost output, but incessant rain flooded 60 mines in Shanxi. Four mines with a combined annual output capacity of 4.8 million tonnes remained shut, a Shanxi official told a press conference on Tuesday.

The most-active January Zhengzhou thermal coal futures touched a record high of 1,640 yuan ($254.44) per tonne earlier in Wednesday trade, having surged almost three-fold year-to-date.

Data released on Wednesday also showed coal imports rose to their highest this year last month as users scrambled to overcome supply constraints.

China brought in 32.88 million tonnes of coal in September,up 76% from a year earlier, data from the General Administration of Customs showed on Wednesday. The monthly total was the fifth largest on record, according to Reuters calculations.

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

Exports from other key suppliers, such as Russia and Mongolia, have been curtailed by limited rail capacity, while shipments from Indonesia have been hindered by rainy weather,traders said.

Power plants also seek to diversify coal sources from niche market such as Kazakhstan.

China’s Premier Li Keqiang said in an online meeting with Mongolian Prime Minister Oyun-Erdene Luvsannamsrai that he would be “happy to see” an expansion in the volume of coal traded between the two countries, the official Xinhua news agency reported late on Tuesday.

The rise in prices and coal import data comes a day after Beijing announced it would allow power plants to charge commercial customers market-based prices for power, in asignificant break from previous policy that allowed industry tolock in fixed-price power deals with suppliers.

Power cuts won’t hit homes in winter, amid crunch: Zhao Chenxin

China’s planning agency on Wednesday said electricity supplies will be high enough to heat homes in the country’s north during the winter, amid a nationwide energy crunch that has seen power cuts in some areas.

Zhao Chenxin, who heads the National Development and Reform Commission, also said China would honour its carbon reduction targets even as it ramps up coal production to meet increased electricity demands.

“All in all, we have the conditions, the resources and the capability to ensure the supply of heating for the winter,” said Zhao.

His remarks follow power cuts aimed at meeting conservation targets and easing the strain on energy supplies that have forced some homes to rely on generators and have meals by the light of cell phones.

While households will pay a standard price for heating and electricity, factories will pay within a range that is 20% higher or lower of that set price as part of an “optimised pricing system,” Zhao said.

That is adjusted from the current ceiling of 10% and floor of 15% and aims to encourage industrial upgrades through the investment in more efficient technologies, Zhao added.

Zhao said coal production was being increased along with natural gas and energy reserves would be deployed to meet demand.

China is the world’s largest carbon emitter, producing an estimated 27% of global greenhouse gases, followed by the United States. China obtains roughly 60% of its power from coal and is opening more coal-fired power plants, while also committing to reducing its use of the fossil fuel.

The country has set a target of generating 20% of its total energy needs from renewables by 2025, reducing total emissions starting from 2030 and becoming carbon-neutral by 2060.

China is also a world leader in producing solar panels and wind turbines for renewable energy. Despite that, the U.S. and others have urged China to adopt more ambitious efforts to keep rising temperatures to no more than 1.5 degrees Celsius (2.7 degrees Fahrenheit) over pre-industrial levels.

Zhao said there was no conflict between the uptick in coal production and China’s carbon control targets.

“China has always honored our commitments for the goals we have set and and we will do whatever we can to achieve them,” Zhao said.

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