BEIJING, Feb. 19 -- The price of 5,500-kilocalorie quality coal at China's biggest coal port, Qinhuangdao, witnessed a sharp decline of 10 percent to 550 yuan ($80) per ton on Tuesday.
The diving price may be in response to a report that China's six power giants will purchase coal on the global market in order to have a bigger say in price talks with domestic coal producers.
The six companies, the country's major thermal coal consumers, are China Resources (Holdings) Co Ltd and the country's top five power generators — China Huaneng Group, China Datang Corp, China Huadian Corp, China Guodian Corp, and China Power Investment Corp.
Sources close to the six power giants told Shanghai Securities News that the six power giants would sign contracts to buy coal from Indonesia, Vietnam and Australia at the upcoming meeting.
China's top five power generators are reportedly in talks with Australian coal producers to buy up to 1 million tons of the fuel at rates cheaper than the domestic spot market, according to a report in China Securities Journal last week.
In addition, power producers in southern China's Guangdong province have signed deals to purchase 7 million tons of coal from Vietnam this year. Official with the province's economic and trade commission said Guangdong may import 20 million tons of coal this year, 45 percent more than last year.
Some analysts think the possibility of more imports may force local producers to lower the contract price for coal, benefiting thermal power producers.
In fact, discussions have been taking place since December to renegotiate the annual supply contracts, but an agreement has yet to be reached.
While the power companies said that coal prices should not be set higher than the previous year's term prices, coal firms insisted that prices should in fact be raised.
"As the winter heating season is almost over, slack coal demand will drive coal prices further down," said Zou Xuyuan, an analyst with China Galaxy Securities.
(Source: China Daily)