A coal mine in Ejin Horo Banner, North China's Inner Mongolia Autonomous Region on October 20, 2021 Photo: VCG

China's top economic planner said coal prices have further room to drop on Friday, as the most traded coal futures dropped to below 1,000 yuan ($156.3) per ton. The agency also announced that coal inventories at major coal-fired plants have topped 100 million tons.

The National Development and Reform Commission (NDRC), China's top economic planning agency, said the production costs for coal are "significantly" lower than the current spot price level.

Late on Friday, the NDRC said coal-fired plants under a national dispatch and distribution system saw their inventories rising to historic highs, returning to the level of above 100 million tons in recent days, as the nation prioritizes the production and transportation of coal.

At the current level, coal inventories are 25 million tons more than what was recorded at the end of September, when the shortage of coal was acute. 

Coal inventories at thermal plants in Northeast China where the need for winter heating is more urgent have nearly doubled, according to the NDRC.

The NDRC made the statement on coal prices based on its initial findings from a recent probe into coal production costs from all the coal-producing provinces and major coal producers in China.

The most traded thermal coal contract for delivery in January 2022 at the Zhengzhou Commodity Exchange closed at 973 yuan per ton, almost half its peak level of 2,000 yuan per ton recently. Speculation was believed to be part of the reason for runaway coal prices.

The NDRC is also studying a coal price intervention scheme with a proposed benchmark guidance price of 440 yuan per ton at ex-pit levels.

Coal futures prices have fallen amid a slew of NDRC announcements during the past two weeks.

High coal prices have been pushing up production costs for downstream industries, as well as having negative effects on winter heating and electricity supply.

The Port of Qinhuangdao, a vital transit port for coal mined in northern China to be sent to thermal power plants in southern China, saw coal inventories steadily increasing since mid-October, with inventories reaching 4.72 million tons by Friday and set to exceed 5 million tons by the end of this week.

Global Times