October 22, 2021: China's thermal coal futures tumbled 13% on Friday, extending losses since Tuesday when they came off record highs after Beijing signalled it would intervene to cool surging prices to help electricity producers out of a widespread power crunch.
The most-active thermal coal futures on Zhengzhou Commodity Exchange, for delivery in January, tumbled to 1,380.8 yuan per tonne by 1106 Beijing time (0306 GMT) – down more than 30% since Tuesday's all-time peak of 1,982 yuan per tonne.
Coking coal was down 11% and coke futures fell 9.5% on the Dalian Commodity Exchange in early trade, having fallen by the maximum 12% in day-time trade on Thursday.
A widening power crisis in China caused by shortages of coal led to record high fuel prices amid booming post-pandemic industrial demand as the country shifts to greener fuels.
China has halted production at factories which has dragged on factory-gate inflation.
China is pushing miners to ramp up coal production and increasing imports so that power stations can rebuild stockpiles before the winter heating season, but analysts say shortages are likely to persist for at least another few months.
“We're now seeing the fruits of China's supply response, as the government has given miners carte blanche to produce at full tilt – even permitting the relaxation of safety inspections in some cases,” said Atilla Widnell, managing director at Navigate Commodities in Singapore.
“The parabolic pricing action largely represented the fear of buyers being unable to source sufficient volumes to feed power plants and coke ovens,” Widnell said.
“Therefore, we can expect prices to fall almost as fast as they've risen now that a wave of supply is inbound,” he added.
China's state planner, the National Development and Reform Commission (NDRC), has said it was studying ways of intervening to lower coal prices and would take all necessary steps to bring them into a reasonable range.
Late on Thursday, the NDRC said it had mobilized regional arms and key coal enterprises to survey coal output, distribution costs and prices.
China's securities regulator has said it would ask futures exchanges to raise fees, restrict trading quotas and crackdown on speculation in response to high coal prices.
The NDRC “has concluded that the unbridled soaring of coal prices is partly driven by those hoping to hit the jackpot by taking advantage of the power supply falling short of actual need”, the Chinese state media outlet China Daily wrote on Thursday.
There should be “zero tolerance to the hoarding of coal”, the newspaper added.
“It is of the utmost importance to rein in coal prices as they will pose a threat to people's daily lives when winter sets in,” it said.
Due to cold winds and rain, temperatures in most parts of central and eastern China are currently lower than normal, the National Meteorological Center said.