January 15, 2018 - Chinese energy conglomerate China Energy Investment Group (CHNENERGY) among other top coal producers have joined the latest move to adjust down spot power coal prices, in response to the government's call for cooling down the recent hot-red market.

CHNENERGY, newly merged from coal miner Shenhua Group and power generator China Guodian Group, would cut spot price of thermal coal by 15 yuan/t from January 12, and actively organize coal production and transport to increase supply at the same time, the company said.

This followed similar price cuts taking effect on January 10 or 11 announced by seven state-owned large coal producers in Shanxi, and leading producers in other provinces soon after.

Prices of thermal coal, used mainly for power generation, have been on a rapid increase entering January, due to a lack of supply and strong restocking demand from utilities.

As of January 12, Fenwei CCI 5500 Spot index surged to 737 yuan/t, 28 yuan/t higher than the start of the month and exceeding last year's highest recorded in late September.  

China National Coal Group, the country's second largest coal miner, sent one ship of spot coal (57,000 tonnes) to Guangdong Yudean Group, and another ship (38,000 tonnes) to Jiangsu Guoxin Investment Group on January 12, at a price 15 yuan/t lower than the current spot prices, marking the start of price cut to spot coal, said the company in a statement on the same day.

A day after, Shandong Energy Group, one large state-owned coal miner in eastern China's Shandong province, announced to lower spot power coal prices by 15 yuan/t; Yankuang Group, another Shandong-based coal giant, also cut prices by 15 yuan/t for its mixed coal products on the same day.

In the meantime, Huaibei Coal Mining Group, Huainan Coal Mining Group and Wanbei Coal-Electricity Group – three Anhui-based state-owned miners – lowered spot power coal prices by no less than 15 yuan/t from January 12.

In Shaanxi, Shaanxi Coal Transport & Sales Group cut spot coal prices by 15 yuan/t for power coal sold directly by rail from January 13; Yushen Coal-Electricity Company, a subsidiary of Shaanxi Lulin Energy Group, adjusted down mine-mouth prices by 10 yuan/t for coal sold locally. 

Earlier on January 12, seven state-owned large coal miners in Shanxi, including Datong Coal Mine Group and Shanxi Coking Coal Group, announced to cut prices by 15-20 yuan/t for their spot coal prices.

Inner Mongolia Yitai Group, a private large coal producer in the northern coal-rich autonomous region, also claimed 15 yuan/t of spot price cut effective January 11.

"To cope with tight supplies and surging prices in the coal market, we as a state-owned enterprise decided to play an active role in keeping coal prices stable by cutting prices," said CHNENERGY on January 13.

Analysts said the move will play a significant role in stabilizing coal prices and partly easing supply tightness in China, which has seen stronger coal demand in the winter heating season.

"Coal prices have reached a really high level that some utilities are unable to bear," said Xu Bo, analyst at Haitong Futures, adding that it was uncertain if the lower coal prices would last.

Analysts and traders expect stronger demand for coal at utilities and industrial plants in the coming months as heavy industry like steel mills and aluminium producers ramp up output once the winter curbs are over in mid-March.

"The coal miners' move just lowers the expectations on the spot market and help power plants stock well to ensure power supply in the coming Chinese Lunar New Year," said one analyst.