China’s four major power generation groups have asked the National Development and Reform Commission, the country’s top economic regulator, to increase coal supplies and reduce coal prices after snowstorms sweeping across central and southern provinces led to major losses for the thermal power sector.
The four top utilities, China Huaneng Group, China Datang Corporation, China Huadian Corporation and State Power Investment Corporation, said in a joint report they are facing pressure due to tight gas and coal supplies and have warned of potential heating and electricity shortages as blizzards continued to buffet some central and southern provinces.
The high coal prices have led to a 40.2 billion yuan ($6.3 billion) loss in the coal power sector for the country’s top five power generation groups, they said.
China’s thermal coal futures hit record highs on Monday, with the most-active futures CZCcv1 reaching 679.6 yuan, the highest since the contract began in 2015.
Thermal coal futures have jumped over 10 percent this year, extending a month long rally, as utilities rush for supplies to deal with soaring power demand and cold weather swept across swathes of the nation.
Analysts believe the price rally was caused by the countrywide blizzard, which has blocked highways and boosted demand for heating.
Wu Lixin, deputy director of the strategic planning research department at the China Coal Research Institute, said that the price rally won’t ease for the moment considering the need to ensure a warm winter for the public during the upcoming Lunar New Year starting Feb 16.
“It is challenging to temper a month-long rally in coal prices. China is currently at its peak period for heating and the government needs to ensure a trouble-free holiday,” she said.
However, Wu expected the coal prices to fall eventually as they were already beyond what the country’s utilities could afford.
China has made great efforts to reduce emissions from coal-fired power plants, with emissions of half of the country’s coal-fired power plants similar to those of gas-fired power plants, she said.
Coal is expected to remain the primary energy source in China, making up some 50 percent of total energy consumption in 2030, unless there are any significant breakthroughs in renewable energy storage technology, she added.
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.
The prices of 5,500 kcal/kg coal in the northern ports has risen to 740 yuan per metric ton, up 130 yuan per ton compared with the same period last year.
With the upcoming Spring Festival and potential large-scale extreme weather, there are concerns heating could not be ensured for households.
Local authorities in Jiangsu asked utilities to ensure sufficient power for heating because of bad weather and snarled transportation last week. The province has 7.46 million tons of coal inventory, enough for 13 days of demand, but seven utilities have less than seven days of stock, it said.