Coal prices continue to rise; there are growing calls to delay the relaxation of policies on imported coal

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Starting from July 1, 2017, in accordance with the Interim Measures for the Quality Management of Commercial Coal, China began to ban coal import operations at Class II ports approved at the provincial level. In late December, the National Development and Reform Commission verbally informed the relevant **departments to temporarily lift the restrictions on imported coal until February 15, 2018. On the morning of January 9, 2018, the **Energy Bureau held talks with major power companies. The discussions covered assessing the impact of the previous policy decision to lift restrictions on imported coal, addressing issues related to power plants’ use of imported coal and the supply of thermal coal, as well as seeking advice from these power companies on policies regarding the current thermal coal supply. 　　　I. Demand during peak seasons drives up domestic coal prices. As we are in the peak period for coal consumption in winter, strong demand coupled with supply constraints has led to steady or slightly rising prices for thermal coal at ports in the north. With a calorific value of 5,500 kcal, the prevailing transaction price for thermal coal is around 720 yuan per ton; some traders offer prices as high as 730 yuan per ton, though the volume of transactions is low ； The heat value is 5,000 kcal, and the prevailing transaction price for coal is 645–650 yuan per ton. Affected by factors such as snowfall in the coal-producing areas and difficulties in obtaining railway shipping arrangements, the supply of coal at ports is tight, and the scarcity of spot supplies is driving up prices offered by traders. II. Strong demand and the implementation of inventory policies keep coal prices rising ahead of the holiday period. Entering January, as temperatures dropped, power plant demand remained high. As of January 9, the coal inventory of the six major coastal power plants was 10.7387 million tons, a 2.8% decline on a year-on-year basis, while the daily coal consumption was 730,700 tons, down 7.58% year-on-year. At present, the available coal supply for coastal power plants lasts for about 14 days. The Guidelines issued by the National Development and Reform Commission on establishing minimum and maximum coal inventory systems state that power plants in major coal-producing regions such as Shanxi, Shaanxi, and Inner Mongolia should maintain an inventory amount equivalent to at least 15 days’ worth of coal consumption ； For coal-fired power plants in other regions, the inventory level should, in principle, be at least equal to 20 days’ worth of coal consumption. ”Therefore, the inventory levels at coastal power plants are currently far below the minimum required levels, prompting downstream power plants to replenish their stocks more actively. At the same time, as snowfall increases, the transportation of resources from production areas is hindered, resulting in a persistent shortage of resources downstream and further driving up coal prices. As the Spring Festival approaches, some coal companies may have plans to carry out maintenance shutdowns, and concerns over the impact of adverse weather conditions have prompted power plants to increase their stockpiling, further enhancing the bullish sentiment in the market. According to analyses, the upward trend in coal prices before the Spring Festival is unlikely to change. III. To ensure a supply of coal for power generation, the National Development and Reform Commission has temporarily lifted the restrictions on imported coal. Following the introduction of these restrictions, China’s imports of coal decreased significantly. December is the peak season for coal consumption, and with the implementation of the coal inventory system at the beginning of the year, demand for coal is quite high. To ensure a supply of coal, the **National Development and Reform Commission has temporarily lifted the restrictions on imported coal. It is understood that following the relaxation of policies on imported coal, imports of Indonesian coal into Guangzhou Port have increased significantly; in the early stages, some ports experienced congestion, and in certain areas the price of Indonesian coal dropped by 10–20 yuan per ton. Imports of coal from other sources remained relatively stable, with prices staying high. According to importers, the relaxation of policies regarding coal imports has only shortened the customs clearance time. However, due to high prices offered by foreign suppliers and tight supply of resources, there has been no significant increase in actual imports. Moreover, since the volume of coal imported is already low, it is difficult to alleviate the domestic supply-demand imbalance in the short term. At the meeting on January 9, the power plant side still strongly advocated for an extension of the policies relaxing restrictions on imported coal, but no decision has been made yet regarding whether to further extend the period during which these import restrictions are lifted. It is expected that the National Development and Reform Commission will make its decision based on the actual market conditions and the implementation of various policies related to thermal coal; given the ongoing rise in coal prices, it is still possible that the extension of these restrictive measures will be lifted.