Power demand in China is expected to grow as the nation enters its winter heating season. The energy situation was exacerbated by floods, which have led to a dramatic surge in coal prices.
Coal futures on the Zhengzhou Commodity Exchange rose by about 9% to a new intraday record of 1,640 yuan ($254.30) a ton on Wednesday. The most active contract, which was up by almost 20% in the previous two sessions, traded 5% higher at the midday trading break.
Heavy rainfall and flooding in China's key coal producing province this week prompted a shutdown of the mines. The situation has improved since, with most of the mines resuming operations. Analysts at CCI say production in Ordos, Inner Mongolia rose to the highest rate this year in recent days.
According to Bloomberg Intelligence analyst Michelle Leung, China's coal shortage "may ease during October but the country still needs more supplies for December and January when the weather could be the coldest." She said that local mines have pledged to increase output, and imports from suppliers including Indonesia are also likely to rise.
Last week, Chinese authorities ordered a huge boost in coal output in order to avert a severe power crunch. This followed a squeeze on the coal supply, along with high prices for the commodity and alternative fuels like natural gas as the world struggles to meet rising demand amid the post-pandemic recovery. China mines and consumes more than half of the world's coal supply, with the fuel accounting for more than 60% of the country's electricity generation.
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