FX.co ★ Thermal Coal Rises to 6-Month High

In late July, thermal coal futures sourced from Newcastle Port climbed to $114 per tonne, marking the highest level in six months. This surge occurred as China sought to tackle the issue of oversupply across various industries. The Chinese government announced intentions to close mines that exceeded their coal production quotas in a recent move to manage the surplus of power feedstock. This decision followed revelations that the government had instructed plants to enhance coal reserves by 10%. This strategy aimed to capitalize on lower prices while mitigating the risk of intensifying producer deflationary pressures. Despite these measures, China's coal output experienced a 3.6% increase in June compared to the previous year, reflecting earlier indications that the country intends to elevate its production by 1.5% to reach 4.82 billion tonnes this year, following a record-setting output in 2024. On the demand side, the output of fossil-fuel power in China declined by 4.7% annually during the first quarter, attributed to decreased power demand and a robust supply of renewable energy sources. Nonetheless, increased infrastructure investments have provided a support base for power demand.