The world's number two economy expanded slower than expected in the third quarter as an energy crisis began to bite, official data showed this week, with electricity shortages and production cuts dragging industrial output.
The crisis comes as global commodity prices soar owing to a surge in demand as the world reopens from Covid lockdowns, while the problem has been exacerbated by government targets to cut emissions and a sharp drop in imports from Australia owing to a political standoff.
On Tuesday, the National Development and Reform Commission (NDRC) said it was studying measures to cap coal prices, which have hit record highs.
In an online statement published after meeting with industry leaders, the NDRC noted that costs "have risen rapidly, hitting successive record highs, greatly pushing up production costs... and adversely affecting power supply and winter heating".
It warned it would take a "zero tolerance" approach and "severely crack down on" activities like spreading false information or price collusion, so as to maintain market order.
"The current price increase has completely deviated from the fundamentals of supply and demand," it added, pledging to have prices return to a "reasonable range".
In a separate notice on Tuesday, the agency stressed that coal mines in the country should strive to achieve more than 12 million tonnes in daily output, with local authorities to ensure production is maximised.
The country's thermal coal futures fell in overnight trading.
Nearly 60 percent of China's energy-hungry economy is fuelled by coal, and it has struggled to wean itself from the fuel despite a pledge to become carbon neutral by 2060.
In recent months, China has been hit by widespread power cuts that forced factories to delay production as businesses are ordered to minimise energy usage.
Officials have been looking for ways to combat the price rally as the winter months approach, ordering mines to expand coal production and for top state-owned energy companies to ensure adequate fuel supplies at all costs.
Localities have also been taking action, with coal port Qinhuangdao reaching an agreement with miners, power plants and railway operators to cap the cost of some supplies at no more than 1,800 yuan ($280) a tonne, according to the state-run Economic Daily.
China's coal inventories stand at 88 million tonnes, enough to last 16 days, according to the NDRC.
China coal prices hit a record high on Tuesday buoyed by a
widening power crunch and cold weather despite Beijing's efforts to
bolster supply.
Thermal coal for January delivery, the most actively traded contract on the Zhengzhou Commodity Exchange, hit a record high of 1,982 yuan per tonne.
Prices are up more than 260% year to date.
With winter approaching temperatures in most central and eastern regions have been lower than normal in the past 10 days, data from China's National Meteorological Center showed.
"Plunging temperatures across parts of China stoked fears that shortages in power are likely to increase over the coming northern hemisphere winter," ANZ analysts said in a note to clients.
Shortages of coal, high fuel prices and booming post-pandemic industrial demand have sparked widespread power shortages.
Power rationing has been in place in at least 17 of mainland China's more than 30 regions since September, forcing some factories to suspend production, disrupting supply chains and adding to factory gate inflation concerns.
Last week, China took its boldest step in power reform by allowing coal-fired power plants to pass on higher costs to some customers, with an aim to encourage power plants to generate more electricity and ease their profitability pressures.
Power-hungry industries such as steel, aluminium, cement and chemical producers are expected to face higher and more volatile power costs under the new policy, inflating their costs and pressuring profit margins.
Alumina and aluminium producers in the southwestern Guangxi region are facing higher power costs, ANZ analysts said.
"Guangxi will put a 50% premium on electricity prices for the most energy-intensive industries," they said.
Beijing has enacted measures to increase the output of coal, which fuels nearly 60% of its power plants, with government data on Monday indicating some increase to supply.
Daily coal output recently hit 11.5 million tonnes, up more than 1.2 million tonnes from mid-September, the National Development of Reform Commission said.
China's coal shortage will likely ease in coming months, with domestic production and imports already showing signs of picking up, a coal industry association said on Sunday, amid government efforts to tackle tight supply.
The Chinese government initiated a raft of measures to boost coal supplies in recent months as it sought to address a coal shortage which has contributed to a nationwide power crunch and disrupted production in various industries. There are signs those efforts are starting to pay off.
Daily coal production by the coal miners monitored by the China Coal Transportation and Distribution (CCTD) rose 4.5% in the first 13 days of October from average daily levels in September, the industrial body said in a statement. The coal miners monitored by the CCTD account for more than half of China's coal output.
China's national energy bureau said last week that daily coal output had climbed to the highest level since February. Among the measures aimed at boosting coal supply, the government has since July approved capacity expansion at more than 150 mines and recently urged closed mines to resume production before most northern regions start the winter heating season next month.
Beijing has also encouraged power plants to source coal overseas to ensure feedstock supply for power generation. China's coal imports rose by 76% in September from a year ago, according to customs data. Refinitiv trade flow data showed about 18.36 million tonnes of coal is expected to arrive in China in October as of Sunday.
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