Return of Mao-era coal coupons show China’s crisis isn’t over

China’s re-opening is positive for its commodity demand, but the reality is unlikely to be as linear and as certain as the market seems to be expecting. (Stock Image)

A local government in China is resurrecting coal coupons — a relic of Mao Zedong’s planned economy days — to ensure its citizens have access to heating fuel as they brace for a bitter winter.

Shuozhou, located in the heart of coal country in Shanxi province, has distributed coupons to 47,000 families to help them purchase the heating fuel, the official China Youth Daily reported on Wednesday. Each coupon is good for two tons of subsidized coal, enough for each household to last through the winter and early spring.

China's coal price

The coupons are coming after a shortage of the fuel drove up prices and led to widespread power curbs last month. A monumental push to boost mine output has led to record production that’s brought the market back into balance for now, but the coldest weather is still ahead. Villagers have begun stockpiling dried corn cobs and firewood in their yards just in case, the state-backed newspaper said.

The return of coupons has been sparking a flurry of discussion on social media, with netizens reminded of the Mao era when households in the world’s most populous country had to purchase their daily necessities with quotas set by the government because of shortages.

Shanxi is one of China’s largest coal mining provinces, and Shuozhou home to the nation’s biggest open-pit mine. As part of the country’s efforts to replenish supplies, Shanxi promised to export an extra 53 million tons this winter, including 16 million from Shouzhou.

The increased coal output, at more than 12 million tons a day nationally, has stockpiles at power plants on track to hit a seasonal record by the end of November, according to the National Development and Reform Commission. Still, meteorologists in the country have warned a weak-to-moderate La Nina pattern is forecast in the coming months, with frigid weather and continuous droughts likely hitting some regions. 

China’s benchmark thermal coal futures on the Zhengzhou Commodity Exchange are up 11% this week. They had tumbled by more than half after hitting a record in mid-October.

(By Alfred Cang)


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