Yanzhou Coal raises price by 4 pct for coal contracts for power generation
Yanzhou Coal Mining Co., Ltd., a coal producer based in Yanzhou city of east China’s Shandong Province, has settled 4.29-million-ton coal contracts for power generation at a price of 463.86 yuan/ton, up four percent, or 17.83 yuan, from one year prior.
The move may break the deadlock of coal price negotiation between coal producers and power enterprises in China this year.
Despite the four percent growth, this year’s price equals last year’s level, since added value tax on coal enterprises has been raised from 13 percent to 17 percent as of January 1, 2009.
China’s coal and power enterprises have been negotiating on coal supply and price for months. The five major power generators and China Resources (Holdings) Co., Ltd. insist on a price cut by 50 yuan/ton from last year’s 460 yuan/ton, while coal producers want to raise the price by 80 yuan/ton.
The five major power enterprises are China Huaneng Group, China Datang Corporation, China Guodian Corporation, China Huadian Corporation and China Power Investment Corporation, which together contribute 40 percent of the country’s total power generation capacity.
The negotiation came to deadlock, because coal producers reckoned that demand of coal for power generation would surge, as peak summer power consumption is yet to come. However, the hope may not come true, as coal inventories in ports and power plants keep rising.
Yanzhou Coal’s four percent price raise partly verifies previous report that power generators had signed contracts with coal producers in Shandong Province before May 28, though no formal statement has been released yet.
However, it is still hard to tell if the Yanzhou deal can bring the national negotiation to a new stage, as coal production in Shandong Province is relatively low.
The country’s largest coal producer Shanxi Province has not changed its mind, and major coal producer China Shenhua Energy Co. (601088.SH) requires price raise by 82 to 540 yuan/ton.
China Shenhua announced on April 29 that it had completed the planned power coal contracts for 2009.
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