China Warns Coal Prices Shouldn’t Rise Too Much, Too Fast

  • Coal price rebound lacks support as demand weak: NDRC official
  • China to continue with efforts to cut coal overcapacity

Excessive gains in coal prices in China, the world’s largest producer of the fuel, undercut the government’s efforts to trim excess capacity and aren’t sustainable in the face of falling demand, according to an official with the country’s top economic planner.

China’s coal consumption fell 5.1 percent from a year earlier to 97.5 million metric tons in the first six months of the year, Lian Weiliang, vice chairman with the National Development and Reform Commission, said in a Xinhua news agency report. Prices are rising because of a 9.7 percent decline in domestic output during the first half of this year, he said.

“Coal prices shouldn’t rise too much or too fast,” Lian said in the report.

Spot power-station coal prices at the port of Qinhuangdao, a domestic benchmark, was at an average of 420 yuan a ton as of Sunday, the highest level in 14 months, data from the China Coal Transport and Distribution Association showed. The price could reach 450 yuan ($67) by December, according to Citigroup Inc.

The government has asked coal mines to reduce annual operating days to 276 from 330 and to run at 84 percent of their production capacity, NDRC said in a statement posted on its website in May. The cut in operating days played an important role in the coal price rebound, Lian said.

Adjusting the System

Coal prices had fallen to 365 yuan a ton in December, the lowest level in more than a decade, CCTD data showed.

“The 600 million tons of production capacity controlled under the 276 working day system can be seen as reserves,” the official said. “Once coal demand rises and supply tightens, we can slightly adjust the system to increase supplies.”

When asked about the recent surge in coal imports, Lian said that China won’t go against its obligations as a major economy, indicating that it won’t curb such shipments. The nation’s coal purchases increased by 8.2 percent to 108 million tons in the six months through June, compared with a 38 percent slump in the first half of 2015.

China Coal Energy Co. led declines in Asia on Wednesday, settling 6.7 percent lower, the biggest drop since January. China Shenhua Energy Co., closed down 2.4 percent, slowing it’s advance this year as one of the best performers on Hong Kong’s Hang Seng Index.

— With assistance by Jing Yang

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