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Thermal coal prices across Asia hit new highs this week as China and India restock critically low inventories to meet robust power consumption, industry sources said.
The most-traded thermal coal futures contract on the Zhengzhou Commodity Exchange CZCcv1 jumped more than 4% on Tuesday to a record high of 979 yuan ($151.63) a tonne.
In India, prices of better burning U.S. thermal coal (6900 NAR) in North Indian retail markets have risen by a third in the last 15 days and are up by more than 100% from a year ago to 14,600 Indian rupees a tonne.
Coal supply is struggling to catch up with demand in top consumer China as mine safety checks slow output.
In number two consumer India, the monsoon season and COVID-19 restrictions have hampered production.
The tight coal market across Asia is accentuating a global bull market in all power generation fuels, including natural gas and high-sulphur fuel oil, buoyed by economic growth and LNG supply issues.
“It is the perfect storm, prices are galloping due to China’s heatwave, shortages with Coal India and power plants, high freight rates, increased appetite in the rest of Asia, tightness due to Indonesian rains, Hurricane Ida in the U.S., and in general a supply crunch,” Puneet Gupta, founder of Indian coal marketplace Coalshastra, told Reuters.
GLOBAL STRENGTH
Coal prices from exporters Australia and Indonesia have also scaled all-time highs recently, with Australia’s Newcastle NCFMc1 prices rising roughly 50% and Indonesian export prices COAL-HBA-ID up 30% in the last three months.
Chinese futures for coking coalDJMcv1, a raw material mainly used in steelmaking, are also surging, and have gained over 50% in the past three months.
Strict supply controls in China have been a catalyst behind the latest price surge.
Shanxi, China’s top coal mining province, on Friday ordered all its coal mines to carry out a two-month safety inspection, and said those which failed to comply would be shut down for rectification.
A state-owned coal mine with an annual output capacity of 6 million tonnes has already been closed for at least a month by the Shanxi government after a fatal accident occurred last week.
The Chinese state planner has also initiated a fresh round of price probes in coal mining regions including Shanxi and Inner Mongolia, aiming to arrest illicit price hikes and to stabilise the market.
“The investigation at this moment is focusing on a few big mines which take responsibility of ensuring supply to coal-fired power plants. It is still uncertain if the probe would expand to a wider range of mines,” said a coal trader in Inner Mongolia.
Inner Mongolia Coal Trading Centre has suspended publication of the daily assessment of spot prices in the region since Aug. 30.
In August, an official at the China Electricity Council confirmed that 11 coal-fired power plants jointly appealed to the Beijing city government through a letter for an increase in electricity prices for bulk trade as power companies struggled with losses amid high coal prices.
“Operations at power plants are extremely difficult and cash flows at some firms have already broken,” said the letter, which was signed by power groups including Datang International Power Generation 601991.SS, China Huaneng Group HUANP.UL, China Huadian CorpCNHUA.UL and CR Power.
Power plants in northeastern China have started to replenish inventories before the winter heating season, while others in the northern parts of the country are expected to follow in the coming weeks.
In India, the government has urged local coal mines to boost output and told utilities to import coal with several power plants on the verge of running out of fuel.
Coal powers nearly three-fourths of India’s electricity demand.