Coal Rises to record in China

Following historic floods in the mining region of Henan in July, heavy rains have recently pounded Shanxi, the country’s largest coal-producing province. The floods hinder China’s efforts to enhance fuel supplies to alleviate the country’s worsening energy crisis. According to local officials, at least 15 people have perished due to the extreme flooding. The flooding has affected more than 1.76 million people in the province.

This week, torrential rains in the northern province caused house collapses and landslides in more than 70 districts and cities. A steep rise in coal prices in China is beginning to cool as main production hubs recover from flood damage. This indicates a respite in the country’s energy crisis. Most coal mines in northern China’s Shanxi province closed due to severe rains. Meanwhile, output in the neighbouring Shaanxi centre is recovering. According to CCI researchers, daily production in Ordos, Inner Mongolia, has risen to its highest level this year in recent days.

Coal futures on the Zhengzhou Commodity Exchange reversed gains Wednesday after surging over 9% to a fresh intraday high of 1,640 yuan ($254.30) per ton earlier in the day. During the midday trading break, the most active contract had gained about 20% in the previous two sessions. Hence was trading 5% higher.

China’s coal shortfall “may lessen throughout October. However, the country still needs more supply for December and January, when the temperature could be the coldest. Local mines have vowed to increase output, and imports from suppliers like Indonesia should climb as well, she said.

The scarcity of coal, combined with high pricing for the commodity and other fuels such as natural gas, has triggered an energy crisis. This has resulted in power outages at factories and industrial units around the country. More than half of the world’s supply is mined and burned in China, and the fuel accounts for more than 60% of the country’s energy generation. Even with mine output beginning, China’s power consumption will likely rise as it approaches its winter heating season. According to UBS Group AG, energy-intensive industries such as steelmaking and chemical manufacturing may continue to decline for the rest of the year.

China also intends to increase coal imports from Mongolia, Premier Li Keqiang said in a video meeting with Mongolian Prime Minister Oyun-Erdene Luvsannamsrai on Tuesday.

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