China coal price freeze could tighten supply

China’s decision to freeze thermal coal prices is an attempt to avert possible power shortages this summer, but could further tighten domestic coal supply by encouraging exports.

Late on Thursday night, China said it would cap thermal coal prices at Thursday’s level through the end of the year, while hiking diesel, gasoline and jet fuel prices immediately and raising retail electricity tariffs beginning July 1.
“Now the power tariffs are up, power plants will reopen generators that had been shut down due to high coal prices. It will drive up demand for thermal coal,” said an executive at a one of the country’s top coal miners, who declined to be identified.

But even as demand rises, the frozen prices will tempt traders to export coal to international markets where prices are strong, instead of selling at capped prices to domestic customers, analysts and traders said.

Reuters