China’s Epic Sandstorm Lifts the Price of Coal That Caused It

Chinese thermal coal prices rose a fourth day for a 13% gain this month, and they remain stubbornly above the 600 yuan ($92) a ton mark that in the past has prompted the state to step in.

They could go higher still as China’s worst sandstorm in a decade -- which may in part have been caused by coal mining -- tightens supply, and the authorities launch a new round of inspections at mines, said Bloomberg Intelligence.

China’s efforts to wean itself off its abundance of coal are centered at the moment on cutting unsafe or old capacity, while promoting alternatives to pick up the slack. But that’s a long and lumpy process, and controlling prices becomes difficult when the weather is cold or the economy is running hot because so much activity is keyed to burning the fuel.

Near-term coal demand continues to be backstopped by robust industrial production, according to Daiwa Capital Markets. On the supply side, Fengkuang Coal Logistics notes that a shortage in the Chongqing region, which closed some outdated mines in January, has left its main city of about 16 million people dependent on shipments from neighboring Shaanxi province.

Longer term, though, the environmental impact of the orange fog that has enveloped northern China is likely to stiffen the government’s resolve to curb coal consumption and speed up the development of renewables, according to BI. China’s key coal-producing regions are the sources of the sandstorm and mining activities that damage water resources are likely to be the major culprits that caused it, BI said.

China Coal Energy, the nation’s second-biggest producer by market value, is among the companies reporting earnings today.

Events Today

(All times Beijing unless noted otherwise.)

  • EARNINGS: China Coal Energy, CGN New Energy, China Oilfield Services, Sinopec Oilfield Service

Today’s Chart

China is well behind on the two-year targets set out in its trade deal with the U.S., having so far only purchased about a third of the goods it said it would. There was widespread skepticism that China would ever live up to its pledges, even before the pandemic. However, it’s unclear if China will face any repercussions from the Biden administration for failing to meet its goals.

China’s Epic Sandstorm Lifts the Price of Coal That Caused It
Markets Latest
Copper -1.1% in ShanghaiCrude oil -4.2% in Shanghai
Iron ore +0.8% in DalianSteel rebar +1.2% in Shanghai
Thermal coal +1.3% in ZhengzhouCoking coal +0.4% in Dalian
Live hogs -0.1% in DalianCorn -0.2% in Dalian
Soybeans +1.2% in DalianRubber -1.4% in Shanghai

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The Week Ahead

Thursday, March 25

  • USDA weekly crop export sales, 08:30 Washington
  • EARNINGS: PetroChina, Cnooc, Datang Corp. Renewable, Zhongyu Gas, Maanshan Steel, Hangzhou First Applied Material

Friday, March 26

  • Bloomberg China economic survey for March, 10:00
  • China weekly iron ore port stockpiles
  • Shanghai exchange weekly commodities inventory, 15:30
  • EARNINGS: Sinopec, China Shenhua, Yanzhou Coal, Xinjiang Goldwind, China Resources Gas, Jinchuan Group

Saturday, March 27

  • Industrial profits for February, 09:30

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