China is looking to put soaring coal prices under control by starting an investigation into the market and coal prices to prevent speculation and hoarding of supply.
Chinese state planner, the National Development and Reform Commission (NDRC), and the state market regulator have announced a probe into the coal prices in the world’s largest energy consumer, according to a statement from NDRC carried by Reuters.
The Chinese authorities will “check abnormal trading and speculation, as well as crack down on hoarding and driving up prices,” the statement reads.
The surging price of coal is affecting the downstream sector and the real economy, according to the Chinese state planning body.
Coal prices in China have surged in recent weeks as thermal coal power plants are hoarding supply ahead of the expected peak in summer demand.
China’s coal market has been distorted since the Chinese authorities banned coal imports from Australia as part of the dispute between the two countries, which has affected coal supply into China. Australia used to be China’s second-largest thermal coal supplier before the geopolitical rift at the end of last year.
Physical prices for coal of the 5,500 kilocalorie/kilogram grade hit a record high in May and have been sitting there since.
During the winter, China had to resort to restricting electricity use due to severely limited coal imports from Australia.
At the end of last year and early this year, factories in some areas in China were working only part-time, and residents in several provinces were asked to save electricity despite the swift industrial recovery from the pandemic.
At the same time, coal use for electricity in China is rising. China’s coal-fired power generation increased last year as growing electricity demand outpaced the installations of new clean power capacity, making China the only G-20 country with rising coal generation, climate and energy think tank Ember said in its Global Electricity Review 2021 earlier this year.