Jan. 12 (Bloomberg) -- Coking coal shortages in China, the largest consumer of the steelmaking ingredient, are worsening as the government gives priority to the rail shipment of energy coal amid heavy snow, Maanshan Iron & Steel Co. said.
"The government's order to ensure thermal coal supply has strained transportation of coking coal," Jin Xiang, a coal purchasing manager at Hong Kong-listed Maanshan Steel said today in an interview. "Chinese steelmakers are all having low inventories of coking coal. The shortages may threaten steel production in the future."
Freezing temperatures and snowfall have forced Beijing, Shanghai, and other regions in China to ration electricity use as demand surged and snow snarled transport of power station fuel. Coking coal prices in Tangshan, Hebei province, have risen 22 percent to 1,950 yuan ($286) since Nov. 1, according to industry researcher Steelhome.
"Every winter, domestic steelmakers would face a coking coal transportation clog as the government put the shipping of thermal coal as a top priority," said Mu Wenxin, a Beijing- based analyst at researcher Umetal.com. "Steelmakers will have to pay for higher transportation costs."
Maanshan Steel, the second-largest Chinese mill listed in Hong Kong, fell 1 percent to HK$5.98 at 12:29 p.m. local time.
"We are importing coal to help relieve our shortages," Maanshan Steel's Jin said. "But overseas supply won't rise immediately at the time we want it."
Operations at Maanshan Steel haven't yet been affected by the lack of coal, Jin said.
Chinese steelmakers are already facing a shortage of coking coal as they increase output and domestic mines can't meet rising demand. Prices may rise 14 percent as supply falls short by 27 million metric tons, Citigroup Inc. said Dec. 4.
Chinese imports of all types of coals rose to 12.65 million metric tons in November, from 11.14 million tons in October, according to data from the Beijing-based General Administration of Customs.
Snowfall is forecast today for the southwestern provinces of Guizhou and Yunnan, with snowy and rainy weather in other parts of southern China subsiding, the China Meteorological Administration said today in an e-mailed statement. Temperatures in parts of northern and eastern China may fall by as much as 8 degrees Celsius today, the weather bureau said.
Heavy snow forced the evacuation of residents in Xinjiang, and sea ice off the coast of Shandong province is the worst in three decades, the official Xinhua News Agency reported.
China may be forced to shut 11 percent of power generators connected to the nation's main grid, Xinhua reported.