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China Power Demand Has Slowest Start to Year in Three Years

March 14 (Bloomberg) -- China’s power consumption had the weakest start to a year in at least three years as industrial output in the world’s biggest energy user slowed.

Electricity consumption in January and February climbed 5.5 percent from the same period in 2012 to 789.2 billion kilowatt-hours, the National Energy Administration said on its website today. That’s the slowest pace among available NEA data going back to 2011. Growth was 6.7 percent in the first two months of last year and 12.3 percent in 2011.

China’s slowing power demand is a threat to mining companies such as China Coal Energy Co. and China Shenhua Energy Co. Domestic power-station coal prices dropped to the lowest level in more than three years this month, industry data show. It also indicates the challenge facing policy makers as the government targets an economic expansion of 7.5 percent this year. Industrial production, which accounts for about two-thirds of the nation’s power use, increased 9.9 percent in the first two months of the year, the weakest start to a year since 2009, government data showed March 9.

“We expect power-consumption growth to improve in the second and third quarters from the relatively weak start into the year as economic expansion may accelerate,” Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai, who forecasts electricity demand will increase 8 percent this year, said by phone.

Secondary industries, which include energy-intensive mining, manufacturing and construction companies, consumed 4.2 percent more electricity in January and February than a year ago, today’s report showed. Power demand by primary industries, which include farming, rose 4.3 percent, according to the NEA. Electricity use by the tertiary sector, including services and logistics, increased 13.8 percent.

Coal Price

Spot coal with an energy value of 5,500 kilocalories per kilogram at the port of Qinhuangdao was at a range of 615 yuan ($98.95) to 625 yuan a metric ton as of March 10, down 5 yuan from the week before, data from the China Coal Transport and Distribution Association show. That’s the lowest price since Oct. 19, 2009, according to data compiled by Bloomberg.

Swaps for coal with a heating value of 5,500 kilocalories a kilograms for shipment to South China in April declined 45 cents to $85 a ton yesterday, Ginga Petroleum Singapore Pte said in an e-mail today. Contracts for the third quarter slid 15 cents to $85.90 a ton. A commodity swap is a financial agreement whereby a floating price is exchanged for a fixed rate over a specified contract period.

Holiday Distortion

China’s electricity demand in February declined 12.5 percent from a year earlier to 337.4 billion kilowatt hours, the NEA said. The monthly data is distorted by the Lunar New Year holiday, also known as the Spring Festival, when factories and offices shut as Chinese workers travel back to their hometowns to celebrate with their families. The break stretched from Feb. 9 to Feb. 15 this year, while it ran from Jan. 22 to Jan. 28 in 2012.

“The Spring Festival is the main factor in the big drop in power-use growth last month,” Shi said.

Power use will increase by as much as 8.5 percent this year as the economy expands, the China Electricity Council, a group of the nation’s biggest electricity producers, said Feb. 28.

To contact Bloomberg News staff for this story: Jing Yang in Shanghai at jyang251@bloomberg.net

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

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