China Coal Prices Rise for Sixth Week; Inventories Rebound

Power-station coal prices at Qinhuangdao port, a benchmark in China, rose for a sixth week to the highest in more than two years as demand soared.

Coal with an energy value of 5,500 kilocalories per kilogram gained 0.6 percent to 810 yuan ($125) to 825 yuan a metric ton as of today compared with a week earlier, according to the China Coal Transport and Distribution Association. That’s the highest since October 2008.

Industrial growth and low hydropower output have increased use of coal, benefitting China Shenhua Energy Co., the country’s biggest producer. Inventories of the fuel at Qinhuangdao plunged to the lowest in almost a year last week, data from the association showed.

To meet rising demand for coal, Daqin railway, which transports the fuel from Datong to Qinhuangdao, resumed normal operations this month after a month-long maintenance in April. Stockpiles at Qinhuangdao, which ships half of China’s seaborne coal, rose for the first time in nine weeks as of today.

Inventories gained 19 percent from a week earlier to 5.84 million tons, the China Coal Transport and Distribution Association said.

Stockpiles also increased on higher imports that have become cheaper. The premium of coal delivered to southern China from Australia to the price of shipments from Qinhuangdao narrowed to the lowest since December last week, according to Bloomberg calculations based on data from CLSA Asia Pacific markets.

Looming Power Shortage

China Shenhua has risen 5.9 percent in Hong Kong trading this year. The stock advanced 1.7 percent to HK$35.15 as of the midday break. China Coal Energy Co., the country’s second- largest producer, gained 0.4 percent to HK$10.48.

The Yangtze River, the site of the world’s largest hydropower dam, received 40 percent less water at its upper reaches this month compared with levels in the past three years, dam operator China Three Gorges Corp. said on May 7.

State Grid Corp. of China, the country’s biggest grid operator, plans to limit power supply to businesses operating in the eastern province of Jiangsu because of a looming shortage, China Business News reported on April 27.

China has experienced power deficits in the past, typically in July and August when rising temperatures increase the use of air-conditioners. The country’s central and eastern regions have been facing tight electricity supply this year and some areas may have a “relatively large” shortfall this summer, the National Development and Reform Commission, the top economic planner, said on April 15.

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

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net.

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