Coal burned by China power plants jumps on heat, virus recovery

Tianjin power plant – Image courtesy of Wikimedia Commons

An indicator of China’s coal demand surged almost a third above levels last year as hotter-than-usual weather and factories rushing to make up for lost orders boosted power demand, spurring a rebound in prices.

Coal use by coastal power plants at five major utilities rose for an eighth day to 577,100 tons as of Monday, more than 30% higher than the same period last year and the most since Jan. 12, data from China Coal Transport & Distribution Association showed. The figure eased slightly to 562,300 tons Tuesday.

China is recovering from the slump in February, when much of the domestic economy was shut to curb the spread of the coronavirus. Factories and companies are now back to work, but restrictions to contain the outbreak in other countries have weighed on export orders and disrupted supply chains. Meanwhile, more than 100 meteorological observatory stations across the nation tested record high temperatures in early May.

“Bulls are coming back to the thermal coal contracts as demand finally shows some strength after factories and businesses resumed operations,” Wang Miao, an analyst with Huatai Futures, said by phone. “Although there are still uncertainties ahead, such as the extent of the virus impact on overseas orders, market sentiment has markedly improved.”

Futures on the Zhengzhou Commodity Exchange last week climbed back above 500 yuan a ton ($70.56), the floor price of a government-preferred range deemed a good balance for both miners and power generators. Prices sank to 479.8 yuan on April 14, the lowest since Aug. 2016, after record high domestic output in March, followed by a surge in imports, outpaced the recovery in demand.

On Tuesday, futures rose 1.3% to 516.6 yuan a ton as of the midday trading break, on course for the highest close since March 27.

The nation’s electricity output shrank 4.6% in March, narrowing the record 8.2% slump in the first two months. The China Electricity Council expects power consumption to grow as much as 3% this year.

(By Charlie Zhu and Jing Yang, with assistance from Dan Murtaugh)

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