Coal Prices Hit Record Highs Consecutively... Early Cold Weather Fuels Upward Trend

[Asia Economy Reporter Yujin Cho] As major power plants and companies in China rush to stockpile coal amid supply pressures, coal prices are hitting record highs day after day. The early cold snap in northern China is also driving the rise in coal prices.

According to major foreign media on the 15th (local time), the price of coal for power generation delivery in January traded at the Zhengzhou Commodity Exchange soared to a record high of 1,669.40 yuan per ton in the morning session.

This marks an approximately threefold increase compared to the beginning of the year, continuing a strong upward trend with double-digit gains throughout the week.

The surge is due to a sharp increase in coal demand driven by energy needs amid the economic recovery from COVID-19, as well as heavy rains in Shanxi Province?which accounts for one-third of China's coal supply?forcing coal producers to halt factory operations.

Industry sources say that although the local governments of Shanxi Province and the Inner Mongolia Autonomous Region have ordered around 200 coal mines in their jurisdictions to increase production, over 60 mines have been damaged by flooding, making production increases difficult. They expect the supply-demand imbalance to keep coal prices rising for the time being.

In particular, the strong cold winds blowing through northern China have increased electricity demand for heating in homes and offices, further fueling price increases.

China, which banned imports of Australian coal since October last year due to trade disputes with Australia, is suffering from coal shortages. As a result, it is diversifying import sources to countries including Russia, Indonesia, and Kazakhstan.

Experts predict that China's power shortage caused by coal scarcity will continue until early next year. Due to reduced coal supply, industrial electricity consumption in China is expected to decline by 12% in the fourth quarter of this year.