Thermal coal prices in China hit a three-year high — OilPrice

In China, spot prices for thermal coal rose for 11 consecutive weeks and reached their highest level in the past three years this week. The benchmark for the Chinese market is the price in Qinhuangdao: for the week ending Monday, it rose to 986 yuan, or $147 per tonne.

Rising prices and limited supply

Since mid-July, coal prices in the world’s largest consumer of this fuel have increased by 24%. According to Bloomberg data reported by OilPrice, this is happening amid lower domestic production and reduced supplies from Indonesia, the largest coal exporter.

Coal accounts for nearly 50% of electricity generation in China. Since late spring, spot prices have risen following the deadliest mine accident in 16 years in May. After it, authorities tightened safety inspections and ordered the suspension of operations at a number of mines in Shanxi, a key coal-producing province.

In its new five-year energy plan, Chinese authorities do not limit the development of coal-fired generation. Beijing views this fuel as a basic guarantee of energy system stability amid the growing share of renewable energy sources.

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Imports from Indonesia declined

Coal production in China is declining this year compared with last year. At the same time, exports of Indonesian thermal coal are being constrained by government production quotas and uncertainty over the country’s policy in the coal mining and export sectors.

Since the beginning of the year, China’s coal imports from Indonesia have fallen by about a quarter compared with last year’s level. The Indonesian government cut quotas for coal mining companies, while a strong El Niño reduced rainfall and river water levels, complicating the transportation of coal by barge to export ports.

Earlier this month, Chinese authorities called on local miners to maintain stable production rates after thermal coal prices increased. Ahead of the winter season, the government seeks to increase production, as coal is expected to play a more important role in stabilizing electricity generation.