(Bloomberg) -- Chinese coal prices are falling as winter nears, offering relief to power plants that buy the fuel and reducing the chances of another round of debilitating power crunches.
Record domestic production and imports, and an increasing contribution from renewables, have put the country in a much better place to weather rising consumption during the peak demand period for heating. Persistently strong coal inventories and a recovery in hydropower generation have helped eliminate the key factors behind last year’s crippling surge in prices.
Ample supply of China’s mainstay fuel is good news for industry as the economy improves after months of poor performance. Electricity generators are also benefiting from weaker prices. Huaneng Power International Co., China’s second-largest supplier, reversed last year’s loss to post its best-ever third quarter profit as margins improved, according to its earnings report this week. By contrast, coal mining profits are declining.
Power plants have now largely completed replenishing stockpiles ahead of winter and benchmark prices have dropped below 1,000 yuan a ton, according to the China Coal Transport and Distribution Association. The downtrend could last for another month.
“There’s no pressure to buy more until the weather gets colder, likely in late November,” Miao Najue, an analyst at the association, told a briefing on Wednesday. That’s likely to curb imports in the final two months of the year as well, he said.
Meanwhile, water levels at the Three Gorges Dam, the world’s largest hydro project, are at their highest level as the rainy season in the south feeds the mighty Yangtze River, said Miao.
The China Electricity Council foresees a “generally balanced” power market in the winter, with periodic shortages met by power transfers across regions, according to a report on Wednesday.
The Week’s Diary
(All times Beijing unless noted.)
Thursday, Oct. 26:
- China Intl Nickel and Cobalt Industry conference in Shanghai, day 3
- EARNINGS BRIEFINGS: Tongwei (14:00), China Oilfield (17:30)
- EARNINGS: Sinopec, China Oilfield, Tianqi Lithium, Metallurgical Corp., Goldwind
Friday, Oct. 27:
- China industrial profits for September, 09:30
- China weekly iron ore port stockpiles
- Shanghai exchange weekly commodities inventory, ~15:30
- EARNINGS BRIEFINGS: Sinopec (09:00), Metallurgical Corp. (14:00), China Coal (15:30)
- EARNINGS: Shenhua, Jiangxi Copper, Zijin Mining, Tongling Metals, CMOC, Anhui Conch, Gotion, Sungrow, Trina Solar, Hoshine Silicon
Saturday, Oct. 28
- Nothing major scheduled
Sunday, Oct. 29
- EARNINGS: Jiangsu Shagang, Three Gorges
On the Wire
South Korean companies are rushing to buy more graphite from China before export controls on electric vehicle battery ingredient take effect in December.
Chinese Premier Li Qiang told his Russian counterpart that he wants to boost their trade and other cooperation, underscoring the nations’ close ties with the war in Ukraine well into its second year.
President Joe Biden and Australian Prime Minister Anthony Albanese are ramping up cooperation on critical minerals and infrastructure initiatives, part of a strategy aimed at countering Chinese military and economic influence in the Indo-Pacific.
The Chinese government is preparing to publish a roadmap to cut emissions of methane, a powerful greenhouse gas, before the COP28 summit that starts in November.
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