Coal demand and prices in China have jumped in recent days as scorching heat waves across most of the country boost electricity demand.
The benchmark spot coal prices at the port of Qinhuangdao have erased a slump from earlier this month and are on track for further increases in the coming weeks amid intense heat, according to the China Coal Transportation and Distribution Association.
“Thermal coal prices are more likely to rise than fall, as the peak season for coal-fired power consumption is far from over, the impacts of El Niño have yet to fully materialize, and the cumulative effects of tightening supply and growing demand will continue to build,” Li Xuegang, a senior analyst at the association, said on a webcast carried by Bloomberg.
China’s spot thermal coal prices are also being lifted by new mine shutdowns in the top coal-producing province, according to analysts at Mysteel.
“Market sentiment jumped amid renewed supply concerns after four coal mines in Yulin, the largest producing hub in Northwest China’s Shaanxi province, were ordered to suspend operations the same day,” Mysteel analysts wrote.
“This could provide a fresh catalyst for a market that has already begun to show signs of strengthening.”
Most of central and eastern China are in the grip of high summer temperatures, while northeastern China, including the large cities of Beijing and Shenyang, is expected to see unusually high temperatures into this weekend.
Heat waves are also depressing hydropower output and wind power generation, which China will have to partly offset with increased coal consumption.
China’s coal inventories are sufficiently high, but its domestic production has seen setbacks since the deadliest mining disaster in 16 years in May prompted authorities to step up safety checks and order suspension of activities in a number of mines in the Shanxi region.
Chinese authorities are not restricting coal power growth in the new five-year energy plan as Beijing doubles down on the fossil fuel as a “bottom-line guarantee” of the electricity system amid rising shares of renewable power.
By Tsvetana Paraskova for Oilprice.com
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