China's Coal Prices Fall for First Time in 3 Months on Stockpiling Surge

Power-station coal prices at Qinhuangdao port, a Chinese benchmark, fell for the first time in three months after stockpiles of the fuel surged and the government called for stability in the cost of commodities.

Coal with an energy value of 5,500 kilocalories per kilogram slipped 0.6 percent from a week earlier to between 795 yuan ($120) and 810 yuan a metric ton today, according to data from the China Coal Transport and Distribution Association. That’s the first decline since Sept. 8.

Power stations have been building inventories since early September to meet winter heating demand, while the official Xinhua News Agency said in August that the nation was expected to experience abnormally low temperatures this year because of the La Nina weather pattern. Coal stockpiles at Qinhuangdao jumped 15 percent from a week ago to 6.73 million tons, according to the China Coal Transport and Distribution Association today.

“Coal demand hasn’t risen as much as expected so the winter stockpiling seems a bit overdone,” David Fang, a director at the association, said by telephone from Beijing. “Demand remained weak because of government measures to meet energy conservation goals, and there were no surprises in the weather.”

China aims to reduce energy use per unit of GDP by 20 percent in the five years ending this month and has taken steps to curb consumption, including shutting factories. Energy intensity fell about 3 percent in the first nine months, Zhao Jiarong, a deputy secretary general at the National Development and Reform Commission, said in a speech posted on the NDRC’s website today.

Price Stability

The coal-price decline at Qinhuangdao follows calls by the government to ensure price stability, after inflation rose to the highest in more than two years in October.

Power-station coal prices under term contracts for 2011 must be unchanged from 2010 levels, Xinhua reported on Dec. 1, citing Cao Changqing, head of pricing at the NDRC.

“The contract-price freeze will affect sentiment on spot prices,” Fang from the China Coal Transport and Distribution Association said. “It’s hard for spot prices to go higher if contract prices are to remain at this level.”

To contact the reporter on this story: Baizhen Chua in Beijing at bchua14@bloomberg.net

To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net

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