Chinese coal price may slump to early 2007 level

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

29 Nov 2008

According to weekly index by global coal, in the end of last week, international coal price crumbles sharply to USD 85.69 per tonne, down USD 12 per tonne or 12.13% in a single week on consecutive price drop of the international petroleum. Industry insiders estimate the coal price in domestic market will slump to around CNY 550 per tonne, the level in early 2007, citing the great pressure pushed by the international market as well as the weak demand of downstream industry.

Mr Wang Shuai top analyst in coal industry of Orient Securities said "At present, many negative factors are still in the way for domestic coal industry therefore, coal price is expected to see a further decrease in the future. He said "Weak demand as a result of sluggish economy does not see any improvement in the midseason, in the mean time, price for thermal coal plunges a lot. On November 17th, 6000 kilocalories per kilogram coal price slides to CNY 780 per tonne FOB at Qinhuangdao Port, down by CNY 90 per tonne or 10.3% WoW a new low in recent years. However, the price drop has accumulated to CNY 160 per tonne or 17% since November."
Mr Wang added that "Besides, in terms of weakening electricity demand, inner Mongolia has reduced its industry grade electricity price by CNY 0.045 per kwh to the present CNY 0.08 per kwh, which indicates that Chinese state government is trying to support economy growth by lowering production cost. Generally speaking, the domestic electricity price is not likely to eye another jump in the future. On the other hand, the contract price for electrical coal in 2009 is more likely to decline given current loss suffered by electricity enterprises."
A research report by BOC international also showed that, "Most people are pessimistic on future industry performance as the price collapses on shrinking demand and cost." It also forecast the domestic thermal coal price would fall further alongside the all-time high inventory, while price for 5500 kilocalories per kilogram electrical coal would remain stable at CNY 590 per tonne in Qinhuangdao.
However, the report pointed out that the demand and output of four industries incl. electric power, steel, cement and fertilizer reduce by a large amount due to the financial crisis. This kind of bad situation is expected to last for a long time and China's coal industry would also

Source: Steel Guru