China Coal Prices Hit Record Highs

As cold weather spread across the country, power facilities hurried to stock up on coal, driving coal prices to all-time highs.

As powerful cold winds blow down from northern China, electricity demand for heating homes and offices show projections of skyrocketing this week. Forecasters estimate that average temperatures in some central and eastern regions may drop by up to 16 degrees Celsius during the next 2-3 days. In the world’s second-largest economy, power shortages have been exacerbated. This is mainly from coal shortages, high fuel prices, and rapid post-pandemic industrial demand. Since September, rationing has been in effect in at least 17 regions of mainland China. This has caused some industries to cease output and disrupting supply lines.

Early on Friday, Zhengzhou thermal coal futures hit a record high of 1,669.40 yuan per tonne. Year to date, the contract has increased by more than 200 per cent. To cope with the colder-than-normal weather, provinces like Heilongjiang and Inner Mongolia, started winter heating. It is primarily powered by coal.

Beijing has implemented several measures to stifle rising coal prices. These approaches include increasing domestic coal supply and reducing power to power-hungry industries and select manufacturers during peak demand periods. It has frequently assured users that sufficient energy supplies will be available for the winter heating season.

Boldest step in a decades-long power

China announced, in its most daring move in a decades-long power sector reform, that it will allow coal-fired power prices to fluctuate. In fact, forecasts predict a change up to 20% from base levels beginning Oct. 15.

They enable power facilities to pass on a significant portion of their high generation costs to commercial and industrial end-users. Projections predict that steel, aluminium, cement, and chemical industries will suffer higher and more variable electricity costs. This is mainly due to the new strategy, putting profit margins under pressure. According to data released on Thursday, factory-gate inflation in September reached a new high. China’s goal is to be “carbon neutral” by 2060. So, China has been working to lessen its reliance on polluting coal power in favour of cleaner wind, solar, and hydro. However, coal will meet the majority of its electrical demands for some time.

China is not the only country experiencing power outages, which has resulted in fuel shortages and blackouts in some areas. The issue has underscored the challenge of reducing the global economy’s reliance on fossil fuels as world leaders prepare to relaunch efforts to combat climate change at a meeting next month in Glasgow.

According to state-run news agency Xinhua late Thursday, Vice Premier Han Zheng announced in a video message at the Russian Energy Week International Forum that China will try to attain carbon peaks by 2030.