China is being swept since last week by cold front, snowfalls and lowest temperatures since 1971. It's a double whammy - first, people need heating in larger amount so more coal is burnt to generate power. And second, due to snow blanket many supplies by road are disrupted resulting in shortage of coal.
Government can't ask people to freeze in the cold, even a communist one. So they are sending soldiers to load coal and re-establish the supplies from mines while the power and steel industries are scrambling to avoid shutdowns from shortage of coal inventory. To secure coal supplies Chinese power plants are buying from the spot market and hence the spot price has gone up by 22% from November and 40% from September.
The interesting part to me is how coal prices play out next. Chinese journalism not being very transparent, it is more susceptible to false rumours, or less effective at curbing them. So price fluctuations should be more pronounced from profiteering by speculative commodity traders. (I don't want to take either side - neither that of opacity of Chinese market nor profiteering from manipulative speculation. Just observing.)
Government can't ask people to freeze in the cold, even a communist one. So they are sending soldiers to load coal and re-establish the supplies from mines while the power and steel industries are scrambling to avoid shutdowns from shortage of coal inventory. To secure coal supplies Chinese power plants are buying from the spot market and hence the spot price has gone up by 22% from November and 40% from September.
The interesting part to me is how coal prices play out next. Chinese journalism not being very transparent, it is more susceptible to false rumours, or less effective at curbing them. So price fluctuations should be more pronounced from profiteering by speculative commodity traders. (I don't want to take either side - neither that of opacity of Chinese market nor profiteering from manipulative speculation. Just observing.)
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