Chinese coal futures plunged on Wednesday, hitting daily trading limits, after the country’s main economic policymaker warned it would intervene in energy markets to curb rising prices.
Thermal coal futures trading on the Zhengzhou Commodity Exchange fell the maximum 8% for a second consecutive day on Wednesday to 1,755 yuan ($274) per tonne.
They had hit record levels in recent weeks and had climbed above 2,000 yuan on Tuesday before plunging by the 8% limit.
The benchmark CSI SWS Coal Index fell 7.4% in early afternoon trading on Wednesday.
The fluctuations came after National Development and Reform Commission (NDRC), China’s powerful state planning agency, moved to damp down rising energy prices adding to the country’s energy crunch.
Record prices have made it too expensive for coal-fired power stations to operate profitably, forcing them to curtail output and exacerbating electricity shortages.
“Recently, coal prices have risen rapidly, hitting record highs in succession, greatly pushing up the production costs of downstream industries, and adversely affecting power supply and winter heating, and all aspects of society have responded strongly,” NDRC said in a statement on Tuesday.
“The current price increase has completely deviated from the fundamentals of supply and demand, and the heating season is approaching, and the price is still showing a further irrational upward trend,” the statement added.
NDRC warned it would “make full use of all necessary means stipulated in the Price Law to study specific measures to intervene in coal prices, promote the return of coal prices to a reasonable range, promote the return of the coal market to rationality, ensure safe and stable supply of energy, and ensure the warmth of the people during winter”.
Beijing has ordered coal producers to raise output, with officials in the Inner Mongolia region, one of China’s largest coal-producing areas, instructing 72 local miners to expand capacity by a total of 100m tonnes.
- George Russell