China’s Thermal Coal Prices Surge to Three-Year High

China's benchmark thermal coal prices have surged to a three-year high after 11 consecutive weeks of increase, reaching a record 986 yuan, or $147 per ton for the week ending Monday, according to Bloomberg data. The spot thermal coal price at Qinhuangdao, the benchmark for Chinese prices, has jumped due to lower domestic production and reduced imports from top coal exporter Indonesia.

China, the world's biggest coal consumer, still relies on the fuel for nearly 50% of its power generation, and prices have rallied by 24% since mid-July. The surge in prices is attributed to tighter supply and high demand. The spike in coal prices began in late spring, following the deadliest mining disaster in 16 years in May, which prompted Chinese authorities to step up safety checks and suspend activities in many mines in Shanxi, the key coal-producing region.

Despite Chinese authorities not restricting coal power growth in the new five-year energy plan, Beijing continues to rely on the fossil fuel as a "bottom-line guarantee" of the electricity system. Chinese output has been declining this year, while Indonesian thermal coal exports have been affected by production quotas and uncertainties about Indonesia's coal mining and exporting sectors.

Year to date, China's imports from Indonesia have dropped by about a quarter compared to last year's levels due to reduced quotas and low rainfall caused by the strong El Niño, disrupting coal barge movements to export ports. Chinese authorities have urged local coal miners to maintain stable production rates ahead of the winter season, when coal will play a crucial role in stabilizing power generation.