Commodities

China coal trade is disrupted as winter looms by COVID epidemics


© Stocksak. FILEPHOTO: An excavator loads coal into a train at Pingdingshan in Henan province of China, November 4, 2021. Picture taken November 4, 2021. REUTERS/Aly Song

By MuyuXu

SINGAPORE, Stocksak – China’s COVID-19 policy is restricting coal supplies and pushing up the prices, industry officials and traders claim. This is just weeks before China’s northern region switches to coal-fired heating systems during winter and as demand rises.

China is determined to ensure adequate supplies of coal this year, after unprecedented power outages in 2021 caused by shortages.

Data from China’s health commissioner showed that China’s top three coal-producing regions have reported hundreds upon hundreds of COVIDs in recent weeks. This has caused disruption to the coal trade. Some mines were unable to ship coal to other provinces, and they were forced to slow down or stop production.

The curbs allow trucks to enter mines with special licences. Drivers are prohibited from leaving their cabs during entire shipment journeys that often exceed 1,000 kilometres.

Local government statements indicated that Zhungeer county, which accounts for 27% of Inner Mongolia’s coal output, had ordered all residents to leave the area since Oct. 19, when a single COVID case was reported at a mine.

“Coal mines will have to reduce operations or even close down if there are no trucks to transport their products,” stated a Zhungeer-based cobbler.

Two coal mines in Wuhai, Inner Mongolia, were shut down two weeks ago by their managers. Because they are not authorized to speak to the media, the people did not want to be identified.

A month-long maintenance shutdown at China’s largest coal transport link, Daqin railway (China), has been extended for a week. This was after dozens contracted COVID in October, two coal traders stated.

Daqin transports approximately 1.3 million tonnes of coal per day on average, but daily volumes have plummeted to between 200,000 and 300,000.

According to data from China Coal Transportation and Distribution (CCTD), coal inventories in major ports have also fallen 3% since September.

‘DELICATE BALANCE’

Spot prices for 5,500 kilocalories of thermal coal have risen 9% over the month and reached a seven-month high at 1,650 Yuan ($228.26 a tonne), according to coal traders.

Zhou Jie, CCTD analyst, said that the impact of lower production has been partially offset since utilities have yet to increase their winter purchases.

Daily coal use at major coastal power plant has declined from more than 2,000,000 tonnes a Month ago to below 1.8 Million tonnes, which is enough for 17 days, CCTD data revealed.

According to data from consultancy Sxcoal the number of vessels waiting to load coal from northern Chinese ports currently stands at around 80 per day. This represents a 24% decrease over the same period last years.

However, traders remain concerned that an extended outbreak could affect markets in two weeks’ time when north China’s heating season begins.

“The market is in a fragile balance. It depends on which factor will break the equilibrium first – the end COVID outbreaks, or the pick-up of demand,” said a Beijing-based coal trader.

($1 = 7.2285 renminbi)

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