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China shutting down coal plants in effort to control smog


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China shutting down coal plants in effort to control smog

China's smog problem is affecting the amount of coal being burned as the government shutters power plants, factories and ports in an effort to fight pollution.

Imports are already being affected as the government has ordered Tianjin, one of the largest ports near Beijing, to stop unloading coal and iron ore, while authorities around the country have closed or cut production at power plants and hundreds of factories, according to a report by Reuters.

Beijing has been under a red smog alert this week, after a toxic cloud of pollution enveloped northern China.

"These are some of the most drastic steps ever by the government to reduce pollution, and it's bound to reduce coal consumption by power stations and imports into China's harbors," a coal shipper told the news agency.

The port closing resulted in a traffic jam of dozens of ships waiting to unload dry bulk, and arbitrage has stopped since the domestic prices for coal have dropped below international prices.

Spot prices for coal in the Asian country have dropped to around $77 per ton, down from around $100 per ton in early November, as the country has ramped up its production after a cut in production work days, according to the report. Australian coal is going for $91 excluding shipping costs.

The north of Asia has also gone through a relatively mild winter, which is affecting coal consumption, the Reuters report said.

Meanwhile, another recent report predicted the high prices experienced in the latter part of 2016 will drop next year due to the increase in work days.

Other reports seem to indicate that coal imports may continue to be strong in the beginning of 2017, since import volumes in December looked on track to match the high volumes experienced in the previous two months.