China will release more than 10 million tonnes of coal from state reserves to ensure steady supply to the market, the state planner said in a statement.
The fifth such release this year will come from dozens of reserve hubs and key ports nationwide, the National Development and Reform Commission said, adding that the government would arrange further releases in line with market demand.
The four previous releases this year totalled more than 5 million tonnes.
The state planner in April urged power plants, coal miners and major coal transport hubs to boost reserves of the fuel because of concerns over tight supplies and an expected demand surge.
It had vowed to build coal stockpiles to more than 120 million tonnes in government-deployable reserves in 2021.
Benchmark spot thermal coal prices soared as high as 995 yuan (US$153.89) a tonne in late June before the planner announced that it would release more coal reserves.
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China also increased coal imports in June to the highest level so far this year.
The nation now has about 40 million tonnes of coal in its reserve bases.
Power loads in several eastern and southern regions, including the business hub of Shanghai, hit historic highs this week as hot weather boosted use of air-conditioning and analysts expect that average coal inventories at six coal-fired power plants in eastern China have fallen to less than 15 days worth of consumption.
China’s June electricity consumption rose 9.8 per cent from a year earlier to 703.3 billion kilowatt hours as first-half consumption jumped by 16.2 per cent.
A research institute affiliated to China’s State Grid estimated electricity consumption in July will be up about 12 per cent from the same month last year.
Meanwhile, surging, post-pandemic U.S. economy is driving an unexpected boom in coal, the latest sign that demand for the dirtiest fossil fuel remains resilient.
American coal production this year will swell 15 per cent to meet stronger demand for electricity at home and abroad, according to the U.S. Energy Department’s July outlook. That would be the most since at least 1990 and nearly double the 8 per cent increase projected in May, when the economic rebound was still in earlier stages of recovery.
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The shift underscores the vicious circle of climate change as more extreme temperatures drive power demand just as extensive drought cuts output from hydropower dams. That prompts utilities to burn more of the dirtiest fossil fuel, a pattern also exacerbated by high natural gas prices. At the same time, key exporters including Australia and Colombia face supply problems that have helped lift global prices to a 10-year high and added to international demand for U.S. coal exports.
“Everything that could happen that’s positive from the demand standpoint is happening,” said Andrew Cosgrove, a mining analyst with Bloomberg Intelligence. “The stars are aligning.”
That growing appetite will help boost U.S. exports of the fuel by 21 per cent this year, and another 19 per cent in 2022, the Energy Department said in mid-July in its latest short-term outlook report. The department said its projections are based on forecasting firm IHS Markit’s projection that the world’s largest economy will grow by 7.4 per cent in 2021.
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The outlook also is driving up mining company share prices. Peabody Energy Corp., the biggest U.S. coal producer, and rival Arch Resources Inc. both hit 18-month highs this week. Consol Energy Inc. is trading near the highest since August 2019.
And the coal boom is unlikely to lose momentum anytime soon. As long as economic growth remains robust, so too will energy demand, according to Lucas Pipes, an analyst at B. Riley Securities.
Even though the fuel faces strong headwinds in the U.S. and Europe, where efforts to curb climate change are prompting utilities to close coal-fired power plants, global consumption is still increasing because of demand in Asia. And because suppliers aren’t opening new mines, prices are likely to remain high.
“I’m not seeing any changes in these trends,” said Pipes. “It bodes well for coal.”
Source: Reuters