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China Vows Crackdown On Coal Futures Speculation

Chinese authorities have signaled they would start looking into the recent price spikes and subsequent plunge in the domestic coal futures market as part of efforts to contain the price of coal amid a power crunch.

China will severely punish market violations in coal futures trading and pricing, the National Development and Reform Commission (NDRC) said on Friday, as carried by the Global Times.

Early this week, the energy crisis amid a coal shortage worsened because of colder weather, sending the key Chinese coal futures contract to a new record high on Tuesday. The most actively traded contract on the Zhengzhou Commodity Exchange rose jumped by 6 percent on Tuesday to exceed the equivalent of $302 per ton. China’s coal prices and coal futures had rallied over the past month amid a shortage of the fuel in the world’s second-largest economy, which has led to power cuts in most Chinese regions.  

Coal supply in China continues to be very tight with roaring power demand, flat domestic production, and a spat with major coal exporter Australia that has seen Chinese authorities impose an unofficial ban on imports.

Surging coal prices and power shortages in China slowed the growth of the world’s second-largest economy in the third quarter. It now threatens to spill over to the global supply chains in the fourth quarter.

After coal futures prices hit a record on Tuesday, Chinese authorities said they would intervene on the market to tame the “irrational” spikes in coal prices.

Coal and oil prices dropped early on Wednesday after China said it was considering an intervention on the domestic coal market to reduce the record prices down to a “reasonable range.”

China’s coal futures have continued to plunge since Wednesday, and settled on Friday at the equivalent of $220 per ton, down by almost 30 percent compared to the all-time high on Tuesday.  

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By Tsvetana Paraskova for Oilprice.com

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  • George Doolittle on October 24 2021 said:
    Not sure how to quantify a hyperinflation as massive as China's at the moment.

    Makes Germany's "Weimar" event which was just that...an event...seem meaningless. Prices are soaring, massive shortages are appearing globally...money besides US Dollars seems to be wholly meaningless at the moment with short term interest rates looking set to surge going into Year end 2021 ("US Federal Reserve losing control" ahem.)

    Anyhow as to the specifics in China my understanding as to why coal futures prices have sold off is that because China's coal mines have straight up stopped producing in Northeast China as the grid collapses there with same said be true for all of Western Europe and Russia now too.

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