China’s Coal Crunch Isn’t Over Yet as Cold Weather Drives Demand

(Bloomberg) -- Record coal production hasn’t ended China’s energy crisis, as the threat of extreme cold this winter could deplete supplies again soon.

A La Nina weather pattern will likely cause temperatures to plunge periodically through the winter, boosting demand to heat homes, according to Qinhuangdao Marine Coal Trading Market Co., a consultancy owned by the one of the country’s biggest coal ports. 

That in turn will put pressure on power generators to keep buying the fuel, helping support prices despite soaring production levels, said Xiao Hong, a senior coal analyst with the firm.

“The energy crisis is not yet over, there will be restocking demand in December to withstand bad weather,” Xiao said in an online conference.

Daily output has risen to more than 12 million tons, and inventories at power plant firms will soon recover to last year’s levels after Beijing pressured miners to crank up production. The government also put a price cap on the fuel at mine mouths, which has made domestic supplies more affordable but reduced demand for pricier imports from countries like Indonesia.

Thermal coal futures on the Zhengzhou Commodity Exchange rose 1% Tuesday to 871.2 yuan a ton, and are up more than 7% since Nov. 15.

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With assistance from Bloomberg