Despite Beijing's efforts to boost supply, China coal prices hit a new high, driven by a worsening power shortage and cold weather. Prices have risen by more than 260% year to date.

Temperatures in most central and eastern parts of China have been lower than normal in the past ten days. ANZ analysts warned that "plunging temperatures throughout areas of China fuelled fears that power shortages are likely to worsen over the coming northern hemisphere winter."

Coal shortages, high fuel prices, and increased post-pandemic industrial demand have all contributed to significant power outages.

Since September, power rationing has been in effect in at least 17 of mainland China's more than 30 regions, forcing some factories to halt output, disrupting supply chains, and raising fears about factory gate inflation.

As most countries cut back on coal, China is burning more of it | Environment | Al Jazeera

Last week, China took a significant step in power reform by allowing coal-fired power plants to pass on increased costs to some customers, with the goal of encouraging power plants to generate more electricity and alleviate profit pressures. Most recently, Chinese authorities have instructed power facilities to stockpile coal in order to combat the energy crisis.

Steel, aluminium, cement, and chemical producers are expected to experience higher and more variable power costs as a result of the new policy, inflating their expenses and putting pressure on profit margins. 

According to ANZ analysts, alumina and aluminium producers in the southwestern Guangxi region are facing rising power costs. "The most energy-intensive industries in Guangxi will pay a 50% premium on electricity costs," they claimed.

Beijing has taken steps to boost coal production, which powers nearly 60% of the country's power plants. The National Development of Reform Commission reported that daily coal output recently reached 11.5 million tonnes, up more than 1.2 million tonnes since mid-September.