Chinese Utilities Urge Regional Govt to Curb Soaring Coal Prices

Workers unload coal at a storage site along a railway station in Hefei, Anhui province, China on Oct. 27, 2009. (Reuters Photo/Jianan Yu)

By : Meng Meng and Josephine Mason | on 9:00 PM March 23, 2017
Category : International, Asia-Pacific

Beijing. China's top power groups are lobbying the local government in the western province of Ningxia to force their main supplier of thermal coal to cut prices as they are bleeding cash due to surging coal costs and falling power prices, two sources said.

A glut of renewable and coal-fired power capacity in the western province has pushed down electricity prices, forcing utilities to sell their power at a discount after the government liberalized its power market. Prices in the region are the lowest in the country.

Seven of China's largest electricity generators including the Ningxia subdivision of China Datang, China Guodian, China Huadian Group, China Huaneng Group and Chinalco Ningxia Energy asked Ningxia regional authorities to force China's largest miner Shenhua Group to lower its coal price to 260 yuan ($37.79) per tonne from 320 per tonne.

The companies submitted the proposal in a document, seen by Reuters, to the Ningxia government on March 17.

In the proposal, the companies also asked the government to temporarily suspend the region's new wholesale power trading market and increase the volume of coal to the region from Inner Mongolia.

The move follows a months-long rally in thermal coal prices in China, the world's top consumer of the fuel, amid fresh concerns about tighter supplies and robust demand even as winter draws to an end.

An official from the Ningxia Economic and Information Committee, which is handling the matter, told Reuters that he met with representatives from the companies on Tuesday.

He confirmed the authenticity of the proposal, but declined to be named because he is not authorized to speak to media.

The seven companies and Shenhua were not immediately available for comment.

"The cost of producing coal-fired electricity has reached 0.27 yuan per kWh, which is higher than our sales price," the seven companies said in the proposal.

"Right now we are fully unprofitable."


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