According to Chinese energy experts, the economic downturn has driven down the price of coal in China, while the weakened demand for coal by energy companies has caused power plants to be overstocked.
Wu Yin, Deputy Administrator of China’s National Energy Administration, said in a speech on Oct. 11 at the 2012 China International Forum on Coal Industry, that large and medium-sized power plants remained overstocked with coal for 29 days with a total of 90.32 million tons of coal as of Sept. 30.
Wu attributes the excess to China’s economic slowdown.
Chinese coal companies have continued to receive imported coal supplies since June, but energy companies were generating less electricity, which drove down coal contract prices. The China Securities Journal reported on Oct. 12, the average price of Shanxi Premium Mix in Qinhuangdao Port, for the third quarter, was 632 yuan (approximately US$100.8) per ton, falling 18 percent since the second quarter.
China Merchants Securities expected third quarter earnings of coal companies to be substantially reduced, especially metallurgical coal companies. The third quarter earnings of major metallurgical coal companies dropped 62 percent compared to thermal coal companies, which averaged a 34 percent drop since the second quarter.
The director of China Center for Energy Economics Research at Xiamen University, Lin Boqiang, told Sound of Hope (SOH) Radio that because of the economic downturn, companies use less electricity, so the price of coal fell sharply, but the storage remains high.
Boqiang said, “When the economy is slightly worse, less power is used, so the coal storage is bound to be more. Since it is cheaper now, it is possible that people will buy more. I think it’s a good opportunity to cancel the coal contracts.”
Wang Lijie, director of Research Institute of Energy Economics and Management, China University of Mining and Technology, told SOH Radio, “Coal prices have risen a few fold in the past decade, but the price of electricity does not rise much. The price of the coal will immediately rise again once the economy turns better.”
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