At the end of January in the new year, Chinese major power producers asked the country’s National Development Reform Commission to increase coal supplies during the Lunar New Year holidays as they expect near-term supply shortage amid the ongoing colder-than-expected winter.
The recent snowstorms sweeping across the country’s central and southern provinces have led to drop in coal supply and rising coal prices, causing serious losses to the thermal power sector.
The four top utilities, China Huaneng Group, China Datang Corportion, China Huadian Corporation and State Power Investment Corporation, said in a joint report that they are facing operation pressure from the high coal prices and demand for coal has picked up due to colder winter and tight gas supply.
It was reported that China’s top five power generation groups suffered from a loss of 40.2 billion yuan ($6.3 billion) in the coal power sector as a result of the jumping coal prices. The coal price in 2018, was predicated to drop to $76.2/mt.
China’s thermal coal futures hit new highs on Monday, with the most-active futures CZCcv1 reaching 679.6 yuan, the highest since the contract began in 2015.
Furthermore, due to year-end mining safety inspection and upcoming Lunar New Year holidays, coal production volume at home is likely to decline, the utilities noted.
They urged the NDRC to encourage thermal coal producers to operate at full capacities during the holidays to increase the stockpiles at utilities and at northern China ports.
Stockpiles at major utilities are expected to fall below 90 million tons before the Chinese Lunar New Year comes, compared to about 100.16 million tons during the holidays last year.
As of Monday, the daily coal consumption rate at six major utilities in the coastal region was reported at 810,000 tons/day, with stocks being able to maintain about 11-12 days of consumption, according to Qinhuangdao Port data.
Stockpiles at some of the power plants can only last for seven days of consumption, while in some extreme cases, the plants only had stocks for about two to three days, the utilities said.
In the report, the utilities also hoped the NDRC could improve coal transport facilities to ease supply, while curbing any speculations at ports.
Currently, the price of 5,500 kcal/kg coal in the northern ports has risen to 740 yuan per ton, up 130 yuan per ton year on year.
The price rally won’t ease for the moment considering the need to ensure the public’s boosted demand for heating during the upcoming Lunar New Year starting Feb 16, said an official with the China Coal Research Institute.
But once the weather improves, coal supply will soon be restored, she added.