Some of China’s major coal producers have vowed to cap thermal coal prices this winter and next spring, after the government asked state-backed firms to ensure stable coal and power supply “regardless of costs”.
China’s thermal coal prices have surged over 200% this year to record highs as mining safety inspections, anti-corruption probes and floods at major mining regions hurt supplies.
China Energy Group and Shanxi Jinneng Holding Group SJAMG.UL, the No.1 and No.8 coal miners by production in the country, have said they will drive up output and guide prices back to a “reasonable range”.
They have vowed to keep spot prices of thermal coal with an energy content of 5,500 kilocalories delivered to Bohai Bay in northern China below 1,800 yuan ($282) per tonne, and prices for 5,000 kilocalorie and 4,500 kilocalorie coal at up to 1,500 yuan and 1,200 yuan, respectively.
Prices for other thermal coal with higher calorific values will not exceed 2,000 yuan a tonne, according to the company statements issued in late Tuesday.
Some other state-backed coal miners in China’s top coal mining region of Shanxi and Inner Mongolia are also rolling out a similar price cap plan, two traders said on condition of anonymity as the information is not yet public.
Chinese Vice Premier Han Zheng has called for “firm measures” to strictly regulate coal price speculation.
The state asset watchdog has also urged state-backed firms to prioritise coal supplies and asked power plants to build up feedstock inventory “regardless of costs”.
China’s daily coal production was at 11.6 million tonnes as of Oct. 18, versus about 11.2 million tonnes last month.
The National Development and Reform Commission said government intervention in coal prices was discussed at a meeting of key producers, given “current price increase has completely deviated from the fundamentals of supply and demand”.
The most-active Chinese thermal coal futures contract on the Zhengzhou Commodity Exchange CZCcv1 dropped 8% at open on Wednesday after hitting a record high of 1,982 yuan on Tuesday.
Source: Reuters (Reporting by Muyu Xu and Shivani Singh; Editing by Himani Sarkar)