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Chinese coal firms raise prices as summer peak approaches

Chinese coal firms are increasing prices for the first time this year as the summer consumption peak approaches, but ample stocks and rising hydropower supplies mean gains will be limited. China has been trying to buoy its coal sector by restricting output and low-grade foreign supplies, but efforts by the top consumer have had little effect on the spot market. Thermal coal prices at Qinhuangdao have dropped 22 percent this year after shedding 15 percent in 2014.

There are, however, indications that demand is picking up ahead of summer, when supplies traditionally come under pressure as consumers crank up their air conditioners. "Power plants were only consuming their stockpiles earlier this year in the belief that coal prices would continue to fall, but now they have changed their minds and think that prices have already bottomed out and will rebound," said Yu Jie, an analyst at China's Galaxy Securities.

Shenhua Energy , China's biggest coal firm, has raised the price of coal with a calorific value of 4,300 kcal/kg by 10 yuan to 317 yuan ($51.15) a tonne. Prices for other grades remained unchanged, traders and analysts said. Other firms, including China Coal Energy and Inner Mongolia Yitai Coal, have followed suit amid indications that supplies could tighten.

Import curbs have dented supplies of lower-quality coal, which power plants mix with higher grades before burning. Total coal imports over the first four months were down nearly 38 percent on the year. Domestic output also fell, down 6.1 percent, over January-April to 1.15 billion tonnes. With inventories at major power plants dropping, the number of anchored vessels waiting to be loaded at the key coal port of Qinhuangdao in northern China has reached its highest in six months, a report by Bank of China International shows.

While falling power plant stocks point to strengthening summer demand, port stockpiles began to inch up again last week. According to the Coalstudy consultancy, Qinhuangdao volumes rose 2.7 percent while those in the key northern port of Tianjin were up 3.3 percent. Caofeidian, another northern port, now holds 24 percent more stocks than last year, despite a 60 percent drop in volumes since March.

"Looking at it from the point of view of demand, there will be an upturn compared to before, but it will not be strong, and so, while we believe coal prices will probably rebound, it will not be by a big margin," Bank of China International said. Hydropower supplies that peak over the summer months would put utilisation rates at China's coal-fired power plants under further pressure, analysts said.

source: http://www.brecorder.com