China has sent officials to inspect coal inventories and crack down on illicit hoarding at ports, following a surge of physical coal prices and tight supplies in the market ahead of the peak consumption season.

Officials conducted research at Caofeidian port and held meetings with port companies and coal trading firms on Thursday before heading to the nearby Jingtang and Qinhuangdao ports, according to three people familiar with the matter.

The three ports are major coal transporting hub in northern China.

Officials from five departments, including the National Development and Reform Commission, State Administration of Market Regulation, Ministry of Emergency Management, Ministry of Environment and Ecology and Ministry of Transport, took part in the inspections.

The five departments and the ports of Caofeidian, Jingtang and Qinhuangdao did not immediately response to Reuters requests seeking comment.

“To be honest, it’s not easy to identify what inventory is built for normal business and what is for speculation,” said one person close to Caofeidian port but who declined to be identified as he is not authorised to speak to media.

The inspectors did not specify if their investigation would target thermal coal or would include coking coal, the person said.

Physical coal prices reached more than 900 yuan ($140.83) a tonne in early May, forcing at least three leading Chinese coal pricing indexes to suspend publication of daily assessments in a bid to stabilise market prices.

But robust industrial demand, unusually warm weather and insufficient power generation from other power sources in southern China supported coal prices.

“Power plants need to build up inventory before the peak summer demand season arrives. But at the moment, a lot of coal is piled at ports in the hands of traders who are holding it for higher prices,” said a coal trader at Caofeidian.

At least four regions, including Shandong, Jiangsu, Zhejiang and Guangdong, have warned of the possibility of electricity shortages in the summer.

The benchmark CCTD Bohai Rim price for spot thermal coal in the 5,500 kcal/kg grade, issued by the China Coal Transportation and Distribution Association, closed at 904 yuan a tonne on June 4.

Most-traded Zhengzhou thermal coal contract CZCcv1 closed down 2.4% on Thursday.
Source: Reuters (Reporting by Muyu Xu and Shivani Singh, additional reporting by Min Zhang; editing by Robert Birsel and David Evans)