Chinese thermal coal futures have climbed 30% this year and reached their two-month high this week as a heatwave across some of the country’s industrial provinces pushed electricity use to a record high. Zhejiang’s power load exceeded 100 million kWh on Tuesday for the first time ever, the State Grid said. Meanwhile, power consumption also surged in the neighbouring Jiangsu and Guangdong as temperatures reached as high as 37 degrees Celsius.
China has faced a shortage of coal supply following a trade spat with Australia, which curbed imports. Local output is also curtailed amid safety inspections after several fatal mining accidents. Traders said coal supply had improved recently but was unlikely to sustain due to an intense draw-down. A rainstorm temporarily disrupted coal transportation from the producing region of Shanxi to some neighbouring provinces. That forced Henan province to stop sending its coal to other regions.
Chinese authorities have tried several measures to cool down coal prices, including releasing its strategic reserves. State media reported that Beijing would release more than 10 million tons of coal from its reserve, which helped futures prices retreat by 3.8% on Thursday. Beijing is also considering capping prices, but the already tight market is still in need of additional supply. Analysts said boosting domestic output would likely take time.
