China coal prices may ease further and boon for power

Wednesday, 21 Mar 2012

Reuters quoted a top Chinese power company executive said China thermal coal prices are likely to ease further this year as the country economic growth slows, a good sign for the world second largest power industry.

Mr Wang Yu Jun chief executive officer of state run power producer China Resources Power Holdings Co Ltd said spot thermal coal prices in China have fallen sharply and the trend would continue as demand weakens.

He said that China benchmark spot coal prices with a heating value of 5,500 kilocalories per kilogram have declined to the current CNY 765 per tonne from more than CNY 800 at the end of last year.

He added that "It is mainly because China GDP growth has slowed substantially since the last quarter. We believe coal prices will fall this year."

Mr Wang said "If this year's GDP growth is in line with what the government has just forecast, I think this year's fall in coal prices will be rather big."

Chinese Premier Mr Wen Jiabao announced earlier this month that the government had cut the nation growth target to 7.5% for 2012 versus the longstanding goal of 8% annual growth in a move anticipated by investors expecting more focus on economic rebalancing and defusing price pressures.

A coal price fall will be boon to China power sector, which predominantly relies on coal for generation and cannot freely pass on fuel costs to end-users.

Source - Reuters