Page 6 - AsiaElec Week 50 2021

AsiaElec COAL AsiaElec

China’s latest clampdown on illegal

mines sends coal prices up

CHINA COAL futures in Chinese thermal coal increased by 10% in just one day causing a suspension of
by 6% earlier this weeks as buyers looked to limit trading. This was followed by a further decline of
supply issues following Beijing’s most recent of 13%, and subsequently intervention by China’s
clampdowns on illegal mine operators in one National Development and Reform Commis-
of the nation’s most prominent coal producing sion (NDRC).
regions. Hoarding of coal at illegal sites, again in
Prices surged to US$114. 29 a ton, on the back Shanxi, and the similarly named Shaanxi region
of a gains leap not seen since the first week of in China’s northwest, supplied on the back of
November when a regional branch of Beijing’s overproduction through the summer was seen
National Mine Safety Administration in Shanxi as a key factor.
Province west of the capital ordered inspections In a statement at the time, the NDRC said
on mines suspected of going above and beyond these illegal coal dumps were in effect “making
capacity . it convenient for illegal traders to hoard coal”
Twelve mines operated by China’s Jinneng which in knock-on effect was “seriously disrupt-
Group are known to have operated beyond ing” the nation’s futures markets.
capacity after management ordered individual China remains highly dependent on coal
mines to delay maintenance and ignore safety supplies for well over half of all electricity gener-
concerns in a push to go all out on mining oper- ated in the country, but has recently committed
ations and production. to reducing overall coal use in the coming years.
The Shanxi branch of the Mine Safety Admin- In a move seen in part as a bid to appease
istration also announced that 14 other mines had government inspectors, a trio of leading coal
moved beyond legal capacity limits with at least producers, the Inner Mongolia Huineng, Shanxi
two known to have been physically shut down. Jinneng Holding, and Shanxi Coking groups, all
Reports from China indicate that rising coal recently agreed to limit prices on thermal coal
prices are being directly attributed to the current sold to $188 per ton, at least through the winter.
suspensions. The agreement came shortly after the NDRC
No official announcement on when the sus- intervention.
pensions will end has yet been released, although Through 2022, prices are expected to dip to
Beijing is known to be going into overdrive to around $110 per ton according to a recent Mor-
help improve air quality ahead of the February gan Stanley forecast; with the missive saying
4th - 20th Winter Olympics. “(We) highlight the risk of disappointing aver-
The current suspensions are not the lat- age selling prices for coal miners on the back of
est move in an ongoing cat and mouse game government intervention,” and “Near term, we
between authorities and illegal mine operators, see the policy measures increasing the incentive
however. for producers to push coal production higher for
Just two months ago futures in coal across the winter peak season.”
China nosedived after a late October period of Long -term, however, descriptions of coal
“clean up and rectification” at a number of ille- futures currently being viewed as “chaotic and
gally operated regional storage facilities. pessimistic” by at least one coal trader in Shang-
At that time, futures on thermal coal on the hai, an opinion shared by others, look to be offset
Zhengzhou Commodity Exchange - one of by market backed guides on coal prices currently
the leading futures traders in China - dropped being investigated.™

P6 www. NEWSBASE .com Week 50 15•December•2021