Coal spot price falls as power companies choose imports
The spot price of coal at Qinhuangdao, where coal from northern China is shipped to the South, dropped 10 percent to RMB550 per tonne yesterday as China's power companies turned to overseas suppliers for cheaper coal.
Local media reported today that a number of power companies in southern China’s Guangdong province signed agreements with Vietnamese coal company VINACL to buy as much as 7 million metric tonnes of coal from Vietnam.
Senior officials in the province estimate a total import of over 20 million tonnes from China’s neighbour. The total cost of Vietnamese coal is RMB 450 per tonne, RMB50 cheaper than the equivalent Chinese coal.
Beijing-based Datang International Power Generation Co (SH:601991, HK:00991) also recently purchased 260 thousand tonnes of coal from Russia and Indonesia, while China Huaneng Group has bought 200 thousand tonnes of coal from the overseas market.
The global financial crisis has reduced demand for coal, and the nation’s exports dropped 36.3 percent in January. China’s power output for the same period of time fell 13 percent. The low price of oil is also putting downward pressure on the coal price. At the same time coal companies are being pressured by Beijing to up safety and environmental standards. As a result power companies failed to reach an agreement on long term coal contracts.
The situation will become worse in March, as the heating season ends and many small and medium coal mines will resume production after safety examinations.
Shares in China Shenhua Energy Co (SH:601088, HK:01088), the nation’s largest coal miner, dropped 7.15 percent on Shanghai trading. Shares in Huolinhe Opencut Coal Industry Co (SZ:002128) dropped 8.01 percent, and Churchill Mining (AIM:CHL), an Indonesian coal miner listed in London, declined 3.13 percent.
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