Shivani Singh

BEIJING (Reuters – China coal prices rose to a record level Tuesday, fueled by a growing power shortage and freezing weather, despite Beijing’s best efforts to boost supply.

The January delivery of thermal coal, which is the most traded contract on Zhengzhou Commodity Exchange reached a record 1,982 Yuan per ton.

Year to date, prices are up by 260%

Data from China’s National Meteorological Center revealed that temperatures are dropping in eastern and central regions as winter approaches.

In a note to clients, ANZ analysts stated that the rising temperatures in China have stoked fear about power shortages.

High fuel prices, rapid growth in post-pandemic industry demand and shortages of coal have all contributed to widespread power scarcity.

At least 17 of the more than 30 mainland China regions have had power rationing since September. Some factories were forced to stop production. Supply chains are disrupted and factory gate inflation is increased.

China made its most bold move in reforming power by allowing some coal-fired power stations to charge higher prices to customers last week. This was done to increase electricity generation and reduce their profit margins.

Under the new policy, power-hungry industries like steel, aluminum, cement and chemical manufacturers will be facing higher and volatile power costs. They are likely to experience an increase in costs as well as pressure on their profit margins. [L1N2R904N]

Analysts from ANZ said that Alumina and Aluminium producers in the southwestern Guangxi regions are now facing increased power costs.

According to them, Guangxi will place a 50% premium in electricity prices for energy-intensive industry.

Beijing has taken steps to improve the coal output, as it is almost 60% of its power plant’s fuel. On Monday, government data showed that some supply had increased.

The National Development of Reform Commission reported that the daily coal production reached 11.5million tonnes. This is an increase of more than 1.2million tonnes over mid-September.