Chinese standoff continues

NEGOTIATIONS between Chinese power companies and thermal coal producers are reportedly still deadlocked over annual contracts, with the China Electricity Council warning the nation could face power outages if the matter is not resolved and industrial production picks up.
Chinese standoff continues Chinese standoff continues Chinese standoff continues Chinese standoff continues Chinese standoff continues


Blair Price

The global financial crisis has not only cost a lot of manufacturing jobs in China but has caused consecutive monthly falls in electricity demand.

Reported by Reuters, and referencing the official Economic Information Daily newspaper, the top five national power companies are chasing a drop of $US7 a tonne in thermal coal prices from last year, while the producers have not yet budged.

“The cold war between the power firms and the coal miners is still carrying on,” CEC chief secretary Wang Yonggan reportedly told the paper.

“If the huge disagreement cannot be properly resolved, China might face fairly large-scale thermal power shortages and electricity outages when power consumption picks up as industrial production gradually recovers.”

Last month the Reserve Bank of Australia cast its own warning about the impacts of China swinging excess thermal coal on to world export markets.

“The scale of China’s domestic coal production, and the fact this output can – in principle – be exported, mean that internal developments in China have the potential to significantly alter the dynamics of the global coal market,” the RBA said in its commodity outlook.

Australia’s central bank cited statistics which revealed that a shift by Chinese producers from domestic supply to exports prior to the commodity boom saw China become the third largest thermal coal exporter in 2003, occupying 15% of global trade and resulting in a 20% decline in global coal prices between 2001 and 2003.

Figures gathered by RBA from the Australian Bureau of Agricultural and Resource Economics, AME Mineral Economics and the International Energy Agency placed China as a net importer of thermal coal for 2007 and was unaccounted for as either an importer or exporter of coking coal, meaning it represented less than 1% of trade.

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