China coal futures hit record high as utilities warn of shortages

[BEIJING] China's thermal coal futures hit record highs on Monday after four top utilities warned of potential heating and electricity shortages and as the worst blizzards this winter continued to blast some central and southern provinces.

Last week, China's State Power Investment Corp (SPIC) , China Datang Corp, China Huaneng Group and China Huadian Corp asked the government to boost supplies of coal and temper a months-long rally in prices.

The most-active futures were up 1.1 per cent at 677.2 yuan (S$140.21) per tonne at 10.41am (0241 GMT), after earlier touching 679.6 yuan, their highest since the contract began in 2015.

Thermal coal futures have jumped over 10 per cent this year, extending a months-long rally, as utilities rush for supplies to deal with soaring power demand as cold weather sweeps across swathes of the nation.

"The price rally is being driven by blizzard weather across the country, which has blocked highways and even rail transportation in some places and boosted demand for heating," said Xu Bo, analyst at Haitong Futures.

"It is hard to ease tight coal supply in a short period since China is currently at its peak period for heating."

However, Mr Xu said he expected coal prices to fall eventually as they were already above levels the country's utilities could afford, although that could take some time.

Renewing worries about the country's winter heating crisis, Jiangxi and Hunan provinces have introduced power rationing to industrial users due to heavy snowfall, with snowy storms also striking parts of the provinces of Anhui, Jiangsu, Zhejiang, Hubei and Hunan.

In Jiangsu, the authorities posted a letter dated Jan 26 on their website asking utilities to ensure sufficient power for heating because of bad weather and snarled transportation.

The province has 7.46 million tonnes of coal inventory, enough for 13 days of demand, but seven utilities have less than seven days of stock, the notice warned.

Chinese utilities are under particular pressure this winter because of low natural gas supplies after Beijing ordered millions of households and some industrial plants in northern China to change to gas heating from coal as part of its war on pollution.

REUTERS