September 17, 2022 - China's top economic body National Development and Reform Commission, or NDRC, has warned domestic coal miners and traders to maintain compliance with medium and long-term contract prices, saying stable prices are crucial to maintaining economic and social operations, according to a note published Sept. 15.
Stating that relevant enterprises have made commitments to strictly implement policies to sell coal within a reasonable price range, NDRC said it will closely monitor the changes in the coal market and conduct reminders and interviews when coal prices exceed a reasonable range. The note comes ahead of the peak energy consumption period during the winters.
"Those who still refuse to make corrections after the reminder and interviews will be transferred to the market supervision department for investigation and punishment according to the law as a clue of suspected price gouging," the note said.
According to sources, the spot price of 5,500 kcal/kg NAR coal at the Qinhuangdao port was at Yuan 1,350/mt ($193.75/mt) on Sept. 14.
According to a note by NDRC in February, the relatively reasonable range for the medium and long-term trading of 5,500 kcal/kg NAR thermal coal at Qinhuangdao Port was to be at Yuan 570-770/mt. Sources said this was against a guided price of Yuan 1,110/mt for the spot market.
The development comes at a time when a rise in Chinese demand has resulted in increased seaborne thermal coal prices.
China's domestic production has been affected by safety checks following accidents at some thermal coal mines, sources said, adding demand for seaborne coal has also increased to ensure a sufficient stockpile ahead of the 20th National Congress of the Chinese Communist Party in the middle of October.
"The rise in the past weeks is mainly because of the Chinese 20th National Congress, and the domestic mine production is influenced by the safety checks," a China-based trader said.
The trader added that he expects Chinese demand for seaborne coal to cool off after the conclusion of the national congress as domestic production picks up once again.
Indonesian coal supplies have been affected by unseasonal rains, which has impeded production at the mines, sources said, adding some mines have been forced to delay production, while ships are facing delays in loading required cargoes.
"Currently, South and East Kalimantan are seeing heavy rains, which has affected coal mine operations. Our vessel has been waiting to be loaded for more than 10 days in the loading jetty," another China-based trader said.
Indonesia-based sources said that the additional supply of 2.2 million mt for state-owned PT Perusahaan Listrik Negara, or PLN, has also contributed to the availability of thermal coal for the export market.
Indonesia last month asked miners to supply an additional 2.20 million mt thermal coal this year to PLN due to higher-than-expected power demand. This was on top of an earlier request for 5.4 million mt in July 2022.
As a result of production being impacted by rains in Indonesia and a rise in Chinese demand, thermal coal prices have risen sharply.
The Kalimantan 5,000 kcal/kg GAR was assessed at $126/mt FOB on Sept. 14, as against $101/mt FOB on Aug. 15, according to data by S&P Global Commodity Insights.
"There is potential for prices to rise further in the short term because the rains have been unseasonal for this time of the year. This is supposed to be the summer season. I expect coal prices to go further up for now," an Indonesia-based trader said.
Another Indonesia-based trader said that he expects prices to remain supported as China tries to ensure sufficient stockpile to meet its winter requirements and avoid a situation like 2021 when the power supply was rationed to industries.