CHINA, the world s biggest coal producer and consumer, has ordered that 2011 contract prices to supply the fuel to power stations be frozen at this year s levels to curb inflation.
The government also increased the amount of thermal coal it would allow to be sold under 2011 contracts to 769 million tons, the National Development and Reform Commission, the top economic planner, said in a statement on its Web site Friday. This year s volume was about 700 million tons, said David Fang, a director at the China Coal Transport and Distribution Association.
The price move was also aimed at helping the nation s power producers, half of which were making losses after their coal costs gained more than 20 percent this year, said Fang.
Coal producers will have to follow the order without too much complaint as everybody knows that the country s top priority now is to fight inflation, Fang said by telephone from Beijing. The contract coal price is effectively the floor for spot prices, so the cap will more or less affect prices of the fuel for immediate delivery.
Power producers and coal mining companies should sign all contract supply agreements within 25 days, according to the NDRC statement.
The spot price for thermal coal could gain 15 percent to about 850 yuan (US$127) a ton on average in 2011 after climbing 22 percent to 740 yuan this year, Helen Lau, a coal analyst with UOB Kay Hian Ltd., said by telephone from Hong Kong. Government efforts to conserve energy and policies to control economic growth would affect demand for coal next year, she said.
The contract volume set by the government would be 23 percent of Chinese coal miners estimated 2011 sales of 3.4 billion tons, Lau said. The average power-station coal price under 2010 contracts is 570 yuan a ton, according to Lau.
(SD-Agencies)
