Bull run in China’s coal stumbles after economic planner’s pledge to cool fuel prices, sending futures and mining stocks tumbling

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Twelve-month thermal coal futures for January 2022 delivery fell by their 8 per cent daily limit on the Zhengzhou exchange to 1,755.4 yuan each

The shares of at least seven coal miners, including the state-owned China Coal Energy and Yanzhou Coal Mining, plunged by their 10 per cent daily limits on the Shanghai and Shenzhen stock exchanges

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Coal being loaded at the Huanghua port in Cangzhou in north China's Hebei province on July 7, 2021. Photo: Xinhua.

Zhang Shidong

Published: 5:30pm, 20 Oct 2021Updated: 6:07pm, 20 Oct 2021

China’s coal futures and mining stocks tumbled after the top economic planning agency said it would rein in runaway fuel prices and ensure stable supply by coal-fired power plants ahead of the forthcoming winter months.

Twelve-month thermal coal futures for January 2022 delivery, the most actively transacted contracts for the fuel, slumped by their 8 per cent daily limit on the Zhengzhou Commodity Exchange to 1,755.4 yuan each. The shares of at least seven coal miners, including the state-owned China Coal Energy and Yanzhou Coal Mining, plunged by their 10 per cent daily limits on the Shanghai and Shenzhen stock exchanges.

The mood has soured suddenly on coal, after a meeting convened by the National Development and Reform Commission (NDRC) with major coal producers and the industry guild to find ways to restore fuel prices back to “a reasonable range” ahead of expected peak demand in the northern hemisphere winter.

“The current run-up of coal prices has completely diverged from the fundamentals of supply and demand,” the NDRC said on its website. “The commission will use every necessary means allowed by law to return the coal market back to rationality and ensure safe and stable supply of energy and heating in winter.”

Source: China Energy Research Society, SCMP Graphics

The statement by the NDRC, responsible for every aspect of China’s economic policy from setting prices to approving investments, is by far the toughest by the government, after surging coal prices led to power cuts, brownouts and shortages in at least 20 provinces. The power crisis has weighed on a manufacturing-led economy that is still trying to outgrow the impact of the Covid-19 pandemic, causing the third-quarter economy to grow at its slowest quarterly pace since September 2020.