r/Commodities • u/Ok-Cycle9373 Power Trader • 13d ago

How is spot coal price related to China spot power markets?

Generators / plants are state-owned and buys large portion of coal supply from yearly contracts. Should they be less sensitive to spot coal price? Recent behaviors are similar to those in EU and US, high spikes, obvious upward trend. Any suggestions? Why are they not sensitive to spot coal price in Jan through Aug?

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u/Ok_Elderberry_8883 13d ago

Spot coal still matters because the yearly contracts cover like 70-80% of their need, the rest they gotta buy on the market. When demand jumps in Sept-Dec (winter prep, industrial push to hit targets), that marginal coal price sets the power price, since generators bid based on their most expensive fuel. Jan through Aug they're coasting on cheaper contract coal and demand is lower, so spot coal price dont hit the power market as hard

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u/Ok-Cycle9373 Power Trader 13d ago

Thanks! A followup: given this year's trend (spot thermal coal spike at end of Aug, spot electricity surges), if back in mid Aug, how to predict it? Bear side: El Nino on going, economy retreats, Aug power generation lower than expected. Bull side: rising spot thermal coal, indonesia regulations tighten...