Coal futures in China notched up another record despite a wild reversal in the final minutes of trading as expectations firmed that authorities will take new action to tame an extraordinary rally.
The most-active thermal coal contract on the Zhengzhou Commodity Exchange plunged 5.5% in the last 10 minutes of trading Tuesday, closing up 0.4% at 1,835.6 yuan ($287) a ton. Prices had earlier risen as high as 1,982 yuan a ton, extending a surge that’s seen the fuel more than double since the beginning of September amid blackouts and power restrictions.
Traders are weighing the impact of strong demand as power plants try to stock up on fuel for winter against the potential for fresh government intervention and prospective price caps. Officials are also accelerating efforts to ensure coal supplies, urging miners to boost output, raising power prices and curtailing electricity to large industrial users.
City officials in Yulin, a coal mining hub in Shaanxi province, held a meeting Tuesday afternoon to ask state-owned mines there to immediately lower prices by 100 yuan a ton, with harsh measures being threatened for any companies that don’t comply, industry publication China Coal Resource reported, without citing its sources.
Guangxi province, a major alumina and aluminum producer in southern China, announced Sunday it will impose a 50% premium on electricity prices for the most energy-intensive industries.
Qinhuangdao, a key coal port, has reached an agreement with coal miners, power plants and railway operators to cap prices of some supplies at no more than 1,800 yuan a ton, the Economic Daily reported, citing the country’s top economic planner.
Favorable supply and demand dynamics mean there’s a chance coal’s gains could continue, Dennis Ip, an analyst with Daiwa Capital Markets, said in a research note Tuesday. “Coal price hikes are likely to be seen approaching the winter heating season,” he said. The fuel provides more than half the country’s energy.
(By Dan Murtaugh, with assistance from Alfred Cang and Kathy Chen)