If there is another cold winter this year, coal demand will exceed reserves. Therefore, before the winter is over, securing coal supplies is still a difficult task, with many challenges for the Chinese government.
After China’s severe power shortage appeared, the Chinese authorities immediately took measures to “stabilize coal prices”, one of the causes of the power shortage. Controlling coal prices right at the “output”, i.e. at coal mines, has helped coal prices in the market continuously decline, especially coal prices at power plants using fuel have changed markedly. , when the coal price here has decreased by 48%.
From October 19, 2021 to now, the National Development Reform Commission, the governing body for electricity has published more than 28 different documents related to coal price control in order to soon “stabilize the price of coal”. “.
According to the content of these documents, on October 27, 2021, the Department of Price, the Development Reform Commission of China convened a conference with the participation of the Coal Industry Association and manufacturing enterprises. , a large coal trader in China to discuss and come up with solutions to soon control coal prices. This conference introduced detailed measures to reduce coal prices for the operation of coal-fired power plants.
Coal price intervention scope includes prices at the mining area and prices at the consumption stages. The intervention method is to set a limit price according to the method (standard price range + volatility range). Measures of impact on coal prices in the process of consumption at the end point are researched by the provinces themselves to provide a price suitable to the characteristics and market of each locality.
The ceiling price set by the Price Department, China Development and Reform Commission is 440 yuan per ton, including tax, plus a fluctuation range of no more than 20% (ie 528 yuan). However, this price adjustment must be approved by the State Council of China (Government). However, after the above information, coal prices in the market began to decrease. Currently, all localities require coal production enterprises to implement the price of 5500 kcal thermal-fired underground coal not higher than 1,200 yuan/ton.
According to the Ordos Daily, Mr. Du Huiliang, Acting Mayor of Ordos City, Inner Mongolia, chaired a meeting on coal supply and stabilizing coal prices in the city, asking to reduce the price of coal 5,500 kcal to less than 1,200 yuan/ton. .
The Chinese media said, the Chinese coal market once again occurred “a wave of discounts”. Contracted coking coal prices on October 19 fell from a peak of 1,982 yuan per tonne to 1,033.8 yuan per ton, down 48%, almost “halving. According to the price research, the prices of 03 major commodities of the coal industry decreased at the same time due to 03 reasons as follows:
First: The State Council of China issued the “Action Plan to reduce carbon emissions by 2030”, requiring the use of electric furnace process to replace blast furnace iron and steel smelting process, strongly promote the use of modern iron smelting technology, gradually replace blast furnace technology and continue to reduce iron and steel output. Until now, China still uses blast furnace technology to smelt steel. The use of electric furnaces also means that the need for coke will be reduced and the future demand for coke will be significantly reduced.
Second: The relevant agencies and departments will strictly inspect and correct illegal coal storage yards, and even put coal inventories due to speculation into use to increase supply for the market.
Third: Using administrative measures to control coal prices. In the immediate future, after conducting administrative measures to intervene in coke prices, the China Development and Reform Commission on October 27, 2021 held a conference on adjusting the prices of other coals in order to step by step offer a specific discount. According to information from this conference, coal prices at the port may drop to 800 yuan/ton.
Regarding the spot price of coal in the market, under the strong intervention of administrative measures, the spot coking coal price has decreased and the coal mines have strictly implemented it at less than 1,200 yuan/ton of 5,500 kcal coal. Most coal mines focus on ensuring supply, rail shipments are normal, and overall inventories are still low.
Wei Yaru, coal analyst at China Haitong, said: “Policies on coal price regulation happen regularly, government pressure on coal prices is still great and market panic is still strong. . Coal storage at power plants is gradually recovering but remains at historic lows.
As the weather turns colder, the “warm air” supply season of Northern China is also approaching, coal demand will continue to increase. If there is another cold winter this year, coal demand will exceed reserves. Therefore, before the winter is over, securing coal supplies is still a difficult task, with many challenges for the Chinese government.
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