China Shenhua Energy hikes August prices
Source: www.chinamining.org Citation: Reuters Date:August 06, 2014
China Shenhua Energy Co Ltd , the country`s top coal miner, has raised its August coal prices after two consecutive months of cuts, trade sources said on Tuesday, in a move that may offer some relief to an industry suffering big losses.
The price hike by Shenhua comes as more than 70 percent of China`s coal firms are already making losses in the first half, according to the country`s coal association, with prices eroded by falling demand growth, a worsening supply glut and a war on smog.
Shenhua raised prices for benchmark coal with heating value of 5,500 kcal/kg by 4 yuan to 489 yuan ($79.25) for August, while its tier-1 quality coal (5,800 kcal/kg) was unchanged at 535 yuan a tonne, traders said.
"We`re about to enter a seasonal demand lull and orders will start to fall by mid-August. If the big boys don`t find ways to support the market, prices will drop further and the outlook will be very, very grim," said a Shanghai-based trader.
Hit by persistent oversupply and slackening demand, China`s benchmark thermal coal prices have been steadily falling since the start of the year and are now hovering at their lowest in more than six years, putting more and more miners under duress.
Taking the lead from the industry leader, China National Coal Group, the country`s second-largest producer, swiftly followed suit and hiked prices by a similar amount for August delivery, industry website China Coal Transport and Distribution Association (CCTD) reported on Tuesday.
Shenhua and China Coal could not be reached for comment.
Traders said the brief increase in spot demand from power plants during the searing summer would offer a reprieve for miners, with industry data from CCTD showing that average daily coal consumption by major coastal power plants has risen to about 700,000 tonnes from about 600,000 tonnes in mid-July.
Stocks at these major power plants have also fallen to an equivalent of 18 days of consumption, compared to 20 days earlier.
"Local prices should increase, or at least stabilise, now that the top miners have started to raise prices. But I`m not expecting any big rebound," said a second coal trader.
Analysts said the overall outlook for miners remain bleak unless steps were taken to cut production to allow swollen inventories to be digested.
Total coal inventories in China have hovered at around more than 300 million tonnes for 2-1/2 years, while unsold stocks at mines rose to a record high 99 million tonnes at the end of June, according to data from CCTD.
To tackle the supply glut, the coal association has proposed a series of plans aimed at cutting output by around 10 percent this year, local media reported.
Proposals include having miners register their monthly production, authorities stepping up checks on output and safety, and increased fines on firms that are producing above their approved capacity. ($1 = 6.1705 Chinese Yuan)
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