China electricity price caps to weigh on coal price

THE price of thermal coal is expected to come under pressure as China seeks to limit price gains for contract thermal coal next year to less than 5% to help power generators avoid winter blackouts.
China electricity price caps to weigh on coal price China electricity price caps to weigh on coal price China electricity price caps to weigh on coal price China electricity price caps to weigh on coal price China electricity price caps to weigh on coal price

 

Lou Caruana

China, which is the world’s biggest energy user and producer and consumer of coal, would also set the increase in the price of electricity to non-residential customers to 5% and leave prices for the retail market unchanged.

The measures are aimed at taking the pressure off power generators’ margins and encouraging them to boost power generation during the winter months when demand is at its highest.

Thermal coal with an energy value of 5,500 kilocalories per kilogram at northern Chinese ports will be capped at 800 yuan a tonne from January 1.

Benchmark prices at Qinhuangdao, the nation’s largest coal port, rose to as much as 860 yuan per tonne on October 23, according to Bloomberg.

China bought record amounts of the fuel overseas in September as importers sought cheaper regional supplies. Purchases rose 25% from a year earlier to 19.1Mt, according to the National Development and Reform Commission.

“The coal price cap will slow down the nation’s imports of the fuel as the purchase is most sensitive to prices,” a China Coal Transport and Distribution Commission director David Fang told Bloomberg.

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