Huaneng, Huadian ban buying of overpriced coal

Two major Chinese coal-fired power generators have banned spot purchases of thermal coal above certain prices as they expect the market to fall in coming months.

China Huaneng Group and China Huadian Corp said the rally in coal prices since mid-April reflected “irrational market expectations,” according to internal notices from the two companies on Friday confirmed by their executives.

Benchmark thermal coal futures on the Zhengzhou Commodity Exchange have gained more than 7 percent over the past month, reaching 643 yuan ($101) a ton on Wednesday, the highest level since late February.

The National Development and Reform Commission, however, said reasonable coal prices should be between 500 yuan and 570 yuan a ton.

“Coal prices lack the momentum to jump further in May and June amid increasing coal output, high inventory at power plants and enough rail capacity for coal shipments,” said Huaneng in its notice.

In April, China’s coal output rebounded from a five-month low in March to 293 million tons as miners ramped up domestic supplies.

The two power generators banned their companies from speculation on thermal coal futures market in order to “minimize market risk,” according to the notices.

Huaneng and Huadian also called on customs to speed up cargo checks to support coal imports and asked local governments to boost coal output.