China Pushes Coal Miners to Lift Supply as Prices Climb

China’s government has called on local coal miners to maintain a stable production rate after a jump in spot prices for thermal coal earlier this month.

Thermal coal prices on the spot market recently climbed to the highest in three years, Bloomberg said in a report today, putting pressure on the government in Beijing to act. China has been reducing the share of coal in its energy mix, but the fuel remains vital, with a share of 49.7% in power generation over the first half of the year. This is the first time coal has dipped below 50% of China’s overall generation.

The reduction has come thanks to growth in wind and solar installations, of which China has the most in the world by far. However, even China, as a leader in alternative energy investment, has been unable to make wind and solar output always available on demand, hence the continued reliance on coal.

China targets clean energy to account for 30% of its power generation by 2030, up from about 22% at present. While wind and solar are set to become the “mainstay” of the electricity mix, coal will continue to grow and act increasingly as a flexible backstop to boost energy security, according to analysts.

According to China itself, it seems coal will remain a key part of its energy mix, judging by the high number of newly approved coal power plants, some already under construction, others pending. This, however, makes China vulnerable to unfavorable price swings in thermal coal—the kind used for power generation—and necessitates action when those swings occur.

This vulnerability drives swings in Chinese coal imports. The recent price jump prompted a dip in August, at 1.5%, after double-digit import growth in the previous two months, according to the Finland-based Centre for Research on Energy and Clean Air.

By Charles Kennedy for Oilprice.com

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