China’s utilities firms have been urged by the country’s National Development and Reform Commission (NDRC) to build up their stocks of thermal coal to ensure they have enough for not less than seven days of consumption, according to recent NDRC notifications circulating in the market from last Sunday. The power suppliers must complete their stock rebuild by no later than July 21, the order warned, adding that the measure was to ensure that no power outages are caused by coal supply shortages.
In the notifications sent to six key state-owned power groups and 16 provincial and regional government authorities, NDRC ordered all the notified parties that before 12:00 pm Beijing time on July 19, they must devise detailed plans to build up the necessary quantities of coal at the power plants under their jurisdictions.
NDRC also ordered these parties to submit formal explanations for those plants that are not considered in urgent need to secure at least a week’s worth of coal stocks, according to these notifications.
The seven days’ inventory at power plants is usually a “warning line” for related authorities to ensure steady supplies of electricity throughout the country, Mysteel Global notes. Although China is actively reducing its reliance on coal in all energy it consumes, coal-fired electricity generation is still the key component of electricity supply.
Currently, domestic coal supplies are tight while demand is buoyant, with the result that Chinese domestic coal prices have been markedly higher this year than last year, Mysteel Global noted.
In contrast to the NDRC’s earlier expectations, domestic thermal coal prices have remained on a plateau as of July 20. On Tuesday, Mysteel’s price assessment for the 5,500 kcal/kg Shanxi blend thermal coal at Qinhuangdao port in North China’s Hebei province had increased by Yuan 60/tonne ($9.3/t) on week to Yuan 1,040/t including the 13% VAT, or only Yuan 5/t lower from the record high of Yuan 1,045/t reached on January 18 this year.
“With the order to build up coal stocks, I have to wonder whether the electricity generators will rush into the market to procure and so continue to push coal prices?” a Shanghai-based market source worried.
“I have heard that offer prices of some 5,500 kcal/kg spot thermal coals had reached close to Yuan 1,100/t. I just have no idea who can accept such high prices,” lamented a trader in South China.
China’s authorities have implemented measures to ensure that coal supplies are sufficient. NDRC stated in its plan on July 15 that over 10 million tonnes of coal would be released the market soon. A Xinhua News report stated that as of that day, total coal stocks under government deployment had reached 40 million tonnes.
Some authorities also encouraged domestic end-users to actively book foreign coal and sign long-term contracts with foreign coal suppliers, according to sources. They also sought the lifting of coal import restrictions other than those imposed on Australian coal.
Over January-June, China’s total raw coal production climbed 6.4% on year to 1.95 billion tonnes, while its coal and lignite imports plunged 19.7% on year to around 140 million tonnes, as reported. Over the same period, the country’s consumption of all types of energy swelled 10.5% on year, or notably faster than the growth rate of coal output, according to the official data.
Source: Sean Xie & Russ McCulloch, MySteel.net