| BEIJING, June 16
BEIJING, June 16 China's thermal coal futures
rallied to a record high on Friday, lifting September futures to
a premium over October, as a prolonged hot spell spurred power
demand and low water levels dented hopes of higher hydro output,
said three industry sources.
The buying lifted futures for delivery in September
to a premium of 6 yuan ($0.88) per tonne over October,
in a structure known as a backwardation, when prompt prices are
higher than those for later months, that reflects tightening
At the start of the month, the spread had been in a 4-yuan
The new curve suggests a brighter outlook for prices of the
fuel most used to generate power in China even as Beijing has
tried to boost supplies to avoid another crunch in supply that
triggered a historic rally in prices last year.
Data earlier this week showed miners in May produced coal at
their fastest pace in years ahead of peak summer demand.
"Price rally has been mainly driven by higher demand," said
Wang Fei, coal analyst at Huaan Futures. "We are seeing
utilities buying more coal from major ports and falling stocks
The most-active domestic thermal coal prices have
risen 39 percent this year, reaching a record high on Friday of
580.8 yuan ($85.29) per tonne. Open interest also hit a record
on Tuesday, reflecting bullish sentiment.
Prompt coal prices for cargoes from Australia's Newcastle
export terminal, Asia's benchmark, have shot up
18 percent since mid-May to $84 per tonne.
Temperatures in northern China have been higher than usual
since May, raising residential air conditioning use and spurring
coal-fired power demand while hydropower generation in the
south, the nation's second-largest power supply, has fallen due
to low reservoir levels.
Total daily consumption from six of the largest coal power
plants rose to 622,400 tonnes per day by June 16, up from
592,000 tonnes a month ago, according to China Sublime
A coal futures trader in Beijing said he had expected
hydropower to help replace coal over the summer once the rainy
season in the south replenished reservoir levels.
"But in recent weeks, we look at extremely low reservoir
levels and think hydro output for summer won't be good and
enough to replace coal power," he said.
Total inventory at utilities dropped 560,000 tonnes in June
to 13.9 million tonnes, equivalent to 19 days of use, according
to China Sublime.
While that is considered a healthy inventory, falling
supplies at ports suggests power companies have continued to
boost buying to replenish stockpiles.
Inventories at major coal port Qinghuadao fell to 5.33
million tonnes from 5.8 million tonnes at the beginning at June,
the port's data showed.
($1 = 6.8100 Chinese yuan renminbi)
(Reporting by Meng Meng and Josephine Mason; Editing by