BEIJING (Reuters) - Four of China’s top utilities have told the government some regions will face heating and electricity shortages due to tightening supplies of coal ahead of the Lunar New Year, the latest sign the nation’s winter heating crisis may deepen.
China’s State Power Investment Corp (SPIC), China Datang Corp, China Huaneng Group and China Huadian Corp asked the government in a letter to boost supplies of coal and tame a wild price rally.
The letter, reviewed by Reuters and dated Jan. 22, was sent to the National Development & Reform Commission (NDRC). A source familiar with the letter confirmed its authenticity.
NDRC and the four companies did not immediately respond to requests for comment.
“If the coal inventories don’t rise to a reasonable level by Spring Festival, then it will be really difficult to deal with the drop in temperatures in some key regions and in the winter heating regions,” the letter said.
Some utilities only have enough supplies for two to three days, while others are getting hit by a big increase in rail transportation fees, the letter said.
The NDRC met with the companies to discuss the issue on Thursday after receiving the letter, the source who confirmed the document said, declining to give further details.
Maintaining stability is a main priority for the Communist Party, particularly ahead of and during Spring Festival. The week-long holiday, also known as Chinese or Lunar New Year, starts in mid-February this year. It is the longest holiday break of the Chinese calendar.
“Some utilities are reluctant to buy coal and are waiting for coal miners to cut prices,” said Cheng Gong, analyst at China Nation Coal Association.
“But rail prices rose as much as 10 percent while the weather is getting worse, so it costs more to buy coal now.”
Thermal coal futures have jumped nearly 10 percent this year, extending a months-long rally, as utilities have scrambled for supplies this week to deal with soaring demand because of a cold snap that has swept across the north.
The threat of chaos in the world’s second-largest economy is the latest twist in a months-long saga that has upended global gas and coal markets, and frustrated the government’s efforts to wean China off its favourite fuel and improve its notoriously toxic air.
Chinese utilities are under particular pressure this winter because of low natural gas supplies after Beijing ordered millions of households and some industrial plants in northern China to change to gas heating from coal as part of its war on pollution.
That forced the government last month to reopen some coal-powered plants and allow homes to burn coal again, spurring demand for the fuel.
Companies have also been scrambling to shore up supplies of natural gas to avoid another supply squeeze due to the cold snap.
The country’s daily power generation hit a winter-time record on Thursday at 20.1 billion kilowatt-hours (kWh), up 15 percent from a year ago due to soaring residential heating demand.
On Friday, the most-active thermal coal futures contract closed at 673 yuan (£74.72) per tonne, up 0.63 percent, after hitting a record intraday high of 674.2 a tonne.
For the graphic 'China coal price versus thermal coal imports', click - reut.rs/2EaIX8f
Reporting by Muyu Xu and Josephine Mason; Additional reporting by Judy Hua; Editing by Tom Hogue