China's utilities warn of power coal shortages amid tight rail capacity, rising prices

sxcoal.com Thermal Coal,  Thermal Power 2018-01-29 08:24:00

Four of China's top utilities have asked the nation's top planner to take measures to boost power coal supply, as some regions may face heating and electricity shortages due to tightening coal supplies ahead of the Spring Festival.


China's State Power Investment Corp, China Datang Corp, China Huaneng Group and China Huadian Corp requested the National Development and Reform Commission in a letter dated January 22 to boost supplies of coal and tame a wild price rally.


"If the coal inventories don't rise to a reasonable level by Spring Festival, then it will be really difficult to deal with the drop in temperatures in some key regions and in the winter heating regions," the power generators said.


Some utilities in the northeast, Hubei and Shandong only have supplies enough for two to three days; some others in coastal provinces also witnessed coal stocks drop below alerting level of seven days, the letter said.


The NDRC met with the companies to discuss the issue on January 25 after receiving the letter, said a source familiar with the matter. No official statements were released regarding the meeting.


Blizzards and low water levels at Yangtze River have affected coal shipping to coastal consumption areas. Truck ban at Bohai-rim ports, part of the measures to combat air pollution, also squeezed transport capacity to haul coal from production areas.


Rail shipment, undoubtedly the main way of coal transport, has been facing a lack of rail wagons, and a 10% increase in rail freight rates by Harbin and Shenyang bureaus is improper and would further worsen tightness in the northeastern region, the letter said.


Logistics cost took up to 50% for trans-regional coal buys of power plants, and nearly all power plants in the northeast were in deficit, report said.


The top four power firms asked the NDRC to strengthen coordination of rail coal transport and prioritize delivery to regions and power plants with lower stocks and larger risk of coal shortage.


They also hoped NDRC could prevent local rail bureaus from raising freight rates to help power firms reduce cost.


They meanwhile expected import coal to continue playing a supplementary role in ensuring supply to coastal areas, sparing more domestic coal for northern areas plagued by tight supply.


Some utilities even had run out of cash in the wake of coal price rally, which has not been reversed downside even after a 15-20 yuan/t price cut by leading miners earlier this month. .


On January 26, the Fenwei CCI Thermal index showed domestic 5,000 Kcal/kg NAR coal was 681 yuan/t FOB with VAT, a surge of 91 yuan/t since the start of winter heating season in November.


Coal demand increased notably in China in the past month, following the drop of hydropower, increased consumption for heating and a lack of natural gas, while output was curbed by mines suspension for holiday and safety concerns.


Long shipping time also rendered import coal incapable of filling the gap in domestic market in a quick manner, not to mention supply constraints in major exporters.


Low stockpiles

Because of rising coal price and a lack of rail wagons, coal stocks at utilities have slumped, adding to risk of power shortage in the heating season.


Power load hit historic high in east and central regions, as heating demand ramped up amid snowstorms.


Authorities in eastern China's Jiangsu and central China's Hunan provinces have recently issued emergency documents, calling for more coal supply to ensure power supply stability in the peak season.


Major power firms in Hunan saw coal stocks plummet 27.5% from early this month and 16.7% from the same period last year to 2.35 million tonnes on January 25.


On the same day, power load in the province hit a new high of 27.84 GW. The power deficit could further expand, likely to touch 28.5 GW, compared with maximum supply capacity of 28 GW, the Hunan Economic and Information Commission said in an emergency notice on January 25.


With rapid growing power demand, power load reached as high as 91.91 GW in Jiangsu, up 20% from the year before, forcing some local governments to ration power at peak hours.


Power load reached 20.81 GW in Jiangxi, also in eastern China, on January 26, slightly beyond maximum supply capacity of 20.8 GW. To meet surging need, Jiangxi is actively buying electricity from other provinces and ordered all local generating units to run full capacity.


Maintaining stability is a main priority for the Chinese government, particularly ahead of and during Spring Festival. The week-long holiday, also known as Chinese or Lunar New Year, starts in mid-February this year, and is the longest and grandest holiday of the Chinese calendar for millions of people to head home for reunion.



(Writing by Jessie Jia  Editing by Harry Huo)
For any questions, please contact us by inqury@fwenergy.com or +86-351-7219322.

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