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Coal price may rise 10% in 2009

By Wan Zhihong (China Daily)
Updated: 2008-12-24 08:05

A worker takes samples of coal for quality tests at a coal depot in Shanghai.

The coal contract price for power generation in 2009 is expected to rise about 10 percent, said a source attending the annual coal prices negotiation conference in Fuzhou, Fujian province.

The official with China Coal Transport and Distribution Association, who declined to be named, said price talks were at a stalemate, as coal miners seek higher prices while power plants hope to lower them.

"The increase in the 2009 coal contract price will not be very sharp. It will be at most equal to last year's level, which is 15 to 20 percent on average," the source said.

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Coal companies at the conference want to increase next year's term prices by 4 percent to pass along their higher taxes and other rising costs. But power plants hope to cut prices by 50 yuan per ton, to ensure that they will not be pushed into losses in 2009, the Shanghai Securities News reported.

Sources said Shenhua Group, China's largest coal company, had reached an agreement with Guangdong Yudean Group Co for a 15-percent rise next year. However, Shenhua yesterday declined to comment.

"There will not be a large increase in next year's coal contract price, as China will see slowdown growth in energy demand," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

China will face a temporary energy glut because of dwindling demand in the global financial crisis, Wang Siqiang, an official with the National Energy Administration, told a forum earlier.

Each year, China's coal producers and power companies sit together to negotiate for the next year's coal prices. It has long been a bone of contention.

Electricity giants continue to insist that rising coal prices have undermined their profits. Compared with the coal prices, which are more market-oriented, the nation's electricity prices are still controlled by the government.

Profits of China's power companies this year have taken a hit due to rising coal prices and caps on power tariffs, with the coal-fired sector expected to report losses in 2008 of more than 70 billion yuan, according to Xue Jing, director of the statistics department at the China Electricity Council.