Chinese power plant margins worst since 2006 as coal prices rise

Saturday, 19 Nov 2011

Bloomberg reported that Chinese power plants face the smallest profit margins in at least five years as government mandated caps on electricity prices prevent utilities from passing along coal price increases.

According to data from Sanford C Bernstein & Co the CHART OF THE DAY shows the cost of coal in yuan per tonne as a percentage of what three benchmark plants in the cities of Taicang Changshu and Chaozhou can charge on average for their power supplies. Fuel expenses are 95.5% exceeding the proportion in 2008 when record coal prices contributed to blackouts in China. The lower panel shows YoY gains in China consumer price index.

Mr Michael Parker a senior analyst in Hong Kong at Bernstein said these plants highlight the difficulties that the entire sector is facing with high coal prices. The positive side for power producers is that inflation seems to be cooling, so there’s a good chance the government may increase tariffs.

China has kept electricity prices unchanged for more than five months as the government focused on fighting inflation which Premier Mr Wen Jiabao said last month was his top economic priority. The CPI in October rose 5.5% from the same period a year earlier compared with 6.1% in September. The MoM drop was the steepest in almost three years.

China State Council is reviewing a plan to increase electricity prices paid to power plants to ensure supplies after generation companies suffered losses because they had to shoulder rising costs. China is the world biggest coal user.

The nation power shortage may peak at 40 gigawatts in the winter and spring as demand growth outpaces supply, the China Electricity Council said last month. That would be about 4%of the country capacity and more than 20% of the generating power in India, the world second-most-populous nation. China suffered blackouts in 2008 as utilities curbed generation amid benchmark coal prices of as much as USD 168 per tonne. The price was at USD 156.20 on November 11 this year.

(Sourced from Bloomberg)

China’s large and medium-size steelmakers see reduced profit margins

Tuesday, 1 November 2011

According to the China Iron and Steel Association (CISA), in September the average profit margin of domestic large and medium-size steel enterprises in China was 2.53 percent. For the first nine months of the current year, the aggregate profit margin in question was 2.99 percent.

In addition, the seventy-seven large and medium-size Chinese steel enterprises surveyed by the CISA achieved a total net profit of RMB 7.9 billion ($1.25 billion) in September this year, down 6.59 percent year on year. During the first three quarters, the aggregate net profit of these steel enterprises totaled RMB 82.34 billion ($13 billion), rising by 27.74 percent year on year.

Tags: China , East Asia and Pacific , Far East , Southeast Asia , steelmaking , fin. Reports

sourced steelorbis

Sumitomo Metal confirms new coking coal pricing proposal from BHPB

Wednesday, 23 Feb 2011

Japan's third biggest steelmaker Sumitomo Metal Industries Ltd said that it had received a proposal from BHP Billiton on a new pricing scheme for supplying coking coal after April.

A company spokesman declined to give details of the proposal by saying “We can't comment on details of our discussions.”

The Nikkei business daily reported last week that BHP, the world's biggest diversified miner, has notified major Japanese steelmakers that from April it wanted monthly pricing of coking coal to replace quarterly pricing.

A shift in pricing would likely further squeeze steelmakers, which have already been reeling from a steep fall in profit margins since they adopted quarterly pricing for major inputs of iron ore and coal in April last year.

(Sourced from Bloomberg)