Price of coal cools to lowest

Thermal coal prices at Qinhuangdao, the major coal trading port in eastern China, fell to a 20-month low on Monday, pushed down by rising hydropower generation and shrinking downstream demand.

According to data from the China Coal Transportation and Distribution Association, the price of 5,500 Kcal thermal coal dropped 2.7 percent to prices ranging from 725 yuan ($114) a metric ton to 740 yuan. It was the biggest fall since March 8, 2010.

Hydropower generation grew 36 percent in May year-on-year, meaning thermal coal consumption fell by 8 million tons, according to a National Development and Reform Commission statement last Wednesday.

"There is plenty of rain in the southern and eastern China, which helped hydropower generation increase," said Chen Lihui, a representative of a coal trading company in Hebei province. "The thermal coal market now has low prices, but no buyers."

He said his company has not had much business since March.

"The big power consumers, such as manufacturing companies and cement producers, have less production this year, which resulted in less power demand," he said. "Sharply decreasing power demand from companies leads to falling thermal coal prices and a weak market."

Downstream users, which are major power generators, have coal inventories of 15.45 million tons. That's enough for more than 20 days, about double the standard level.

Meanwhile, coal inventories at Qinhuangdao have reached 9.33 million tons, the highest level since November 2008. Any coal inventory above 8 million tons at the port is considered to be oversupply.

Li Xuegang, an expert from the Qinhuangdao Coal Trading Center, said increasing coal imports and falling demand are the main reasons for the high inventory.

The port added 580,000 tons to its coal inventory since Sunday.

The largest group of coal ports - Qinhuangdao, Huanghua and Tangshan - together have coal stocks of 16 million tons. Stockpiles have been increasing since the beginning of the month.

According to customs data, China imported 86.55 million tons of coal in the first four months, with a growth rate of 69.9 percent, a record high.

Coal imports from Indonesia, South Korea and Canada all grew more than 50 percent in quantity. Imports from South Africa, Australia and Russia doubled.