Chinese Miners Meet 65% of Thermal-Coal Sales Quota

By Bloomberg News

Aug. 6 (Bloomberg) -- Chinese coal miners, led by China Shenhua Energy Co., have sold more than half of a government quota for the fuel as of the end of May at higher prices after demand improved, said an industry official.

Mining companies agreed to supply more than 400 million metric tons to power plants this year, equivalent to 65 percent of a state-set quota based on transport capacity, Liu Caiying, chairwoman of the China Coal Transportation and Distribution Association, said today. Shenhua sold the fuel at 540 yuan ($79) a ton, she said. That’s a 17 percent gain from last year.

Power plants had earlier sought a price cut of as much as 10 percent as electricity demand had fallen because of the world recession, while miners wanted to charge 10 percent more compared with 2008, Xie Juchen, a fuel purchasing director at China Electricity Council, said in December.

“Based on our research, local producers charged utilities an average 540 yuan a ton for the fuel under this year’s term contracts, an estimated 10 percent increase from 2008,” Shi Yan, a power analyst at UOB-Kay Hian Ltd., said by phone in Shanghai.

The higher contract prices rose in line with the improving economy, as well as spot prices at China’s Qinhuangdao port, a benchmark in the world’s biggest producer of the fuel.

The Chinese economy grew 7.9 percent in the second quarter as the government’s 4 trillion-yuan stimulus spending boosted industrial output. Electricity production posted the first increase in four months in June.

Prices of coal for immediate delivery at Qinhuangdao gained 1 percent to 570 yuan a ton by Aug. 3 from a week earlier. The fuel fell to this year’s low of 558 yuan a ton in March, after reaching a record 995 yuan last July.

Shandong Producers

Hong Kong-listed Yanzhou Coal Mining Corp. and miners in eastern Shandong province raised prices by 4 percent, Liu said by telephone from Beijing today. Zhang Baocai, board secretary of the miner, didn’t answer calls to his office.

The country’s major power producers have signed contracts for coal to be supplied to plants in Shandong at prices 4 percent higher than the 460 yuan a ton last year, Zhang Gelin, head of securities trading at Huadian Power International Corp., said on June 5.

Huadian Power, the listed unit of China Huadian, closed unchanged at HK$3.01 in Hong Kong trading today, while Yanzhou advanced 1 percent to HK$12.44. Shares of Beijing-based Shenhua Energy were flat at HK$32.80.

Shandong and neighboring Shanxi are China’s largest coal- producing provinces. The nation’s biggest power generators include China Huaneng Group Corp., China Datang Corp., China Huadian Corp., China Guodian Corp. and China Power Investment Corp.

Xie at the China Electricity Council, which represents domestic power producers, didn’t answer calls made to his mobile phone and office.

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