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

October 13, 2021: China's thermal coal prices surged to fresh record highs on Wednesday 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.

China, the world's largest coal consumer, has been grappling with a growing energy crisis brought on by shortages and record-high prices for fuel. The government has taken a range of steps to boost coal production and manage electricity demand at industrial plants.

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 were up 8% at 1,781 yuan a tonne in early Wednesday trade, having surged a whopping 124% year-to-date. November futures were up 9.4% to over 1,800 yuan.

The coal surge comes a day after Beijing announced it would allow power plants to charge https://www.reuters.com/world/china/china-liberalise-thermal-power-pricing-tackle-energy-crisis-2021-10-12 commercial customers market-based prices for power, in a significant break from previous policy that allowed the industry to lock in fixed-price power deals with suppliers.

The policy shift, which is expected to spur more coal-fired power generation, is the latest in a raft of measures designed to ease the power supply crunch that has forced several industry sectors in China to curb power use in recent weeks.

Reuters