- Shaanxi prioritises summer coal supply
- Contract deliveries and stocks emphasised
The guidance, a detailed document prepared by the Shaanxi Provincial Development and Reform Commission, requires local coal producers to maintain stable and efficient production while strictly complying with safety requirements. It also emphasises the fulfillment of medium- and long-term coal contracts, requiring suppliers to deliver no less than 90% of contracted volumes during the peak summer months, typically from June to August.
Meanwhile, regulated thermal power plants in the province are required to maintain inventories equivalent to at least 20 days of consumption before the summer peak begins. Utilities whose stocks fall below 15 days of consumption during the peak season will be placed under enhanced supervision and required to replenish inventories promptly.
The guidance comes at a sensitive moment for China’s thermal coal market. A catastrophic coal mine accident in late May triggered extensive safety inspections across major producing regions, as reported. Although the inspections were mainly concentrated on coking coal mines, concerns over broader supply disruptions quickly spread across the thermal coal market, encouraging precautionary buying by some participants and lifting spot prices.
According to Mysteel’s assessment, the benchmark 5,500 kcal/kg NAR thermal coal price at northern transfer ports rose from Yuan 835/tonne ($123.2/t) on May 22 to Yuan 861/t on June 5.
Against this backdrop, the Shaanxi notice carries significance beyond the province itself. More importantly, it suggests policymakers are gradually shifting their focus from post-accident safety inspections toward ensuring adequate coal supply and stable energy prices during the summer peak season.
While the requirement to fulfill at least 90% of medium- and long-term contracts is not new and has appeared repeatedly in central government guidance over recent years, the tone of the latest document signals a stronger emphasis on supply security. The policy effectively prioritises contract coal deliveries, ensuring that power plants receive stable supplies.
The inventory requirement could also provide underlying support for market sentiment, particularly for utilities whose long-term contract deliveries are insufficient to meet regulatory stock targets. Such plants may eventually need to turn to the spot market to replenish inventories if consumption rises sharply during the summer.
The guidance sends a clear signal that authorities remain focused on maintaining stable coal supply during the summer peak season. While it does not fundamentally alter current market fundamentals, it reduces the likelihood of a disorderly supply shock following the recent safety inspections.
Looking ahead, China’s thermal coal market is likely to remain broadly rangebound in the near term. The key test may come in late June and July, when rising electricity loads and inventory drawdowns will determine whether utilities return to the spot market in larger volumes.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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