China tightens grip on coal market as prices continue to rise

Hubei, China. Credit: Wikimedia Commons

Chinese regulators shut more coal mines amid rising concern over industrial accidents as prices continue to rise for the fuel that provides half the country’s energy.

Hubei has halted all coal mining operations from June 15 to July 5 after a gas pipeline explosion in the province killed 25 people on June 13, according to a statement from the local government on Saturday. It follows Anyuan Coal Industry Group Co. on Friday halting five mines in Jiangxi province from June 21 to July 4.

The mine shutdowns follow a spate of deadly accidents and coincide with nationwide celebrations of the 100th anniversary of the founding of the Chinese Communist Party, which begin July 1. The halts are suppressing domestic output even as strong industrial activity and high temperatures boost demand.

“This year’s peak summer season may be the most difficult year in history to maintain supply,” Fengkuang Coal Logistics said in a research note on Monday. “Coal prices will remain at a high level.”

Thermal coal futures on the Zhengzhou Commodity Exchange rose as much as 2.9% Monday to 859.2 yuan a ton, after hitting a record last month.

Rising prices have led to speculation of government intervention in the market. China’s top economic planning body specifically mentioned coal on Friday as it repeated its pledge to stabilize commodities, and the government is considering instituting price caps on the fuel.

Shanxi province’s mining hub of Yulin will establish a mechanism to regulate sales prices for all miners in the region, industry publication Thermal Coal Today reported. The price will change weekly, based on the Qinghuangdao benchmark.

Yulin has been testing a price cap on coal as part of the price curbs being mulled by the government.

(By Dan Murtaugh, with assistance from Alfred Cang)

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