By Meng Meng and Josephine Mason

July 8, 2017 - Mining and electric utility executives in China are preparing for a possible government intervention into coal markets after prices hit the 600 yuan($88.25) a tonne threshold the state planner said would trigger steps to cool prices.

A prolonged heatwave across northern China, hydropower cuts in the south, a fresh crackdown on mine safety and imports curbs have triggered a weeks-long rally in the world's top buyer of the fuel.

On Friday, the most-active futures prices hit 598.6 yuan($88.04) per tonne. That's up 18 percent since mid-May. In January, state economic planner the National Development and Reform Commission (NDRC) said in a document it is comfortable with a price of 470 yuan($69.12) to 570 yuan ($83.82) per tonne and will use measures to cool the market if it rises above 600 yuan.

But spot physical prices offered by major producers, such as Shenhua, ChinaCoal and Shandong Energy, are already at 600 yuan, sources with the three companies said driven by strong demand.

"Our coal mines are almost working around the clock now," said Wang Binghua, president of State Power Investment Corp, on the sideline of a company news conference this week. It has 81 million tonnes of annual coal capacity.

It is not clear what level of intervention the government would consider. The NDRC may try to force miners to cut prices or set limits on the amount of inventory utilities and trading companies can hold to prevent them from buying extra volumes that could push prices higher or create shortages, according to four mining company executives and one power company executive.

At least three of the top four mining firms, including ChinaCoal, Shenhua and Yitai, have halted spot sales to meet increasing demand from long-term contracts with clients, sources with the three companies said.

The NDRC, Shenhua, ChinaCoal, Shandong Energy and Yitai did not respond to requests for comments.

Major utilities buy on long-term contracts at about 570 yuan($83.83) per tonne, although the smaller plants and traders are exposed to the cash market.

Analysts say utilities have about 20 days of inventory on hand, which is enough to see them through the busy summer months.

Still, the price gains have tested Beijing's efforts to boost supplies, quell concerns about tightening availability during peak demand season and cool the red hot market.

In a June 30 document, the NDRC asked miners to boost output as part of a series of steps to ensure power supplies over the summer.

"Policy makers are trying to curb the rally in prices. But there is such a big demand for coal now that (Shenhua)'s spot prices has reached 600 yuan," said a source from Shenhua.

A senior official at top utility Huaneng said a stable coal price was an increasingly important issue ahead of the Communist Party Congress this fall.

"Our internal discussion with NDRC officials showed that the agency is keen on stabilising prices and making sure utilities get enough supply during summer in preparation for the Congress meeting," the official said.