It is reported that the high hovered thermal coal prices has been down for its sixth week and experts say the intensive monopoly of coal industry may pull up prices later August and lead to a new round of coal shortage next year.
1. Price Hike around the Corner
By August 11, BSPI is reported to continue declining for another week. 5,500 kilocalories per kilogram thermal coal price at Bohai Rim close at CNY 829 per tonne off CNY 2 per tonne from that in the previous week down for the sixth week in a row and the cumulative decline touches CNY 14 per tonne.
An expert from China Guodian Corporation notes that a few yuan fall will do no good to the cost of power plants. Once the coal price picks up, it will undergo a drastic rise of tens of hundreds yuan and will not retreat back. So the so called decrease is almost meaningless towards power plants.
More analysts reckon that despite the current retreat, coal prices this month is expected to stabilize and soar. By the end of summer peak, power plant all over the country, holding a strong bullish forecast for coal price, will stock as much as possible, which will further push up the price.
Mr Huang Teng from China Coal Group predicts that coal prices will rise on about 20th of this month following up by a dramatic increase.
2. Coal Monopoly Bolsters Prices
Mr Huang analyzes that one supporter of coal prices comes from the government administrative monopoly. Since the Central Government endows local governments with the managing right of large coal mines the latter controls the mining rights and becomes beneficiary of China coal.
And the conglomerates, represented by large coal enterprises after integration in Shanxi, Inner Mongolia also drag up prices by controlling the output, launching commercial monopoly. He said that “In terms of thermal coal, China Coal, Shenhua Group and the Cosmos can completely control domestic thermal coal prices."
Finally the monopoly of railway transportation is also the bottleneck of power plants. Huang said that China's tight rail transport could only feed half of the brisk freight demand. As a result China's coal supply does not depend on how much coal can be produced but how much coal can be shipped.
Meanwhile, international coal prices continue to rise as a result of greatly increased demand for domestic coal, domestic coal transportation monopoly will further boost the role of the show.
3. New Round of Coal Shortage
Mr Huang also points out that the price gap between foreign and domestic coal drives China imports about 150 million tonnes of coal annually. As per NBS national coal output in 2010 is seen at 3.24 billion tonnes, which is sufficient to meet domestic demand whereas the spread still pushes China to import more. This will boost international coal prices and curb imports, and finally end-users will turn to domestic coal.
On the other hand, coal imports will be curtailed in pace with the recovery of international especially Japan economy. Coal prices may hike by 15% by these two factors, thus coal shortage will be inevitable next year.
(Sourced from MySteel.net)
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