Chinese deadlock over coal prices

THE five Chinese national power utility companies have reportedly not signed a single procurement contract with national thermal coal producers this year as both groups fight for the best possible deal.
Chinese deadlock over coal prices Chinese deadlock over coal prices Chinese deadlock over coal prices Chinese deadlock over coal prices Chinese deadlock over coal prices

Shanxi province in China

Blair Price

Reported by the South China Morning Post newspaper, the deadlocked negotiations have resulted in a rapid fall of inventory at China’s largest coal port in Qinhuangdao, where stockpiles were down 46% on Friday to 4.99 million tonnes compared to the mid-November peak of 9.23Mt.

While the nation’s power consumption is yet to regain ground from falls over the last three months, including a drop of nearly 9% in December year on year, China Coal Transportation and Development Association data revealed the lower stockpiles had lifted spot prices in the country.

Notably Shanxi premium blend coal at a heating value of 5500 kilocalories per kilogram has risen to a spot price of 600 yuan a tonne ($US87.74/t), some 17.6% higher than the mid-December low of 510 yuan ($US74.57/t).

Chinese analysts are mixed on more possible price rises, but Nomura Securities analyst Donovan Huang told the newspaper the power companies were more likely to obtain a favourable outcome as the negotiations with the coal producers drag on.

While cuts in Chinese coal production have played a role in reducing stockpiles, spot prices could suffer from further drops in electricity demand after the current Chinese winter season.

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