Key facts
- China's benchmark thermal coal prices reached a three-year high this week.
- The spot thermal coal price at Qinhuangdao was 986 yuan ($147) per ton for the week ending Monday.
- Coal prices have rallied 24% since mid-July due to tighter supply and high demand.
- China's imports from Indonesia have dropped by about a fourth year-to-date.
- Chinese authorities are pushing to boost coal production ahead of winter.
China's benchmark thermal coal prices have surged for 11 consecutive weeks, reaching a three-year high this week. The spot thermal coal price at Qinhuangdao, a key benchmark, rose to 986 yuan ($147) per ton for the week ending Monday, according to data compiled by Bloomberg. This marks a 24% increase since mid-July, driven by tighter supply and high demand.
The price rally began in late spring, following a deadly mining disaster in May that prompted enhanced safety checks and mine suspensions in the Shanxi region. Despite China's commitment to coal as a "bottom-line guarantee" for its electricity system, domestic output has trended lower year-on-year. Simultaneously, Indonesia, a major coal exporter, has reduced its thermal coal exports due to government production quotas and uncertainty surrounding its mining and export policies. El Niño-related disruptions to river transport have further impacted Indonesian exports, leading to a roughly 25% drop in shipments to China this year.
In response to rising spot prices and lower domestic output and imports, Chinese authorities have urged local miners to maintain stable production rates, particularly in preparation for the winter season when coal is crucial for stabilizing power generation.