Chinese thermal power industry in large loss despite falling coal prices Viewpoint,  Thermal Power 2017-11-24 18:28:00

Many Chinese coal-fired power plants are suffering from large losses now, even though domestic coal prices are virtually heading downward.

"We are losing money in both heating and power generation businesses. I hope the government can convince coal miners to lower their prices so as not to break our capital chain," a source from a combined heat and power plant complained.

The complaint epitomized coal-fired power enterprises have been in wide losses across the country for the time being.

Photo – A thermal power plant is struggling to survive in Sichuan province     Source:

In fact, coal enterprises have made a big concession mediated by the central and local governments.

On the eve of the National Day holidays (October 1-8), Shenhua, China Coal and other 24 large coal miners adjusted down their own prices by 10 yuan/t at northern ports.

Particularly, the central government made a commitment to strictly punishing malicious hoardings and false information spreading activates in a conference just after the holidays.

It was said in September, prices for the domestic spot 5,500 Kcal/kg NAR coal traded at northern ports rose to the highest of 740 yuan/t FOB with VAT, and even 800 yuan/t some traders placed.

The main reason behind the large-scale losses is the excessive investment in the coal-fired power industry that made the supply-demand relation unbalanced.

The actual power output, according to media report, is only 50% of its total capacity, which means half of generation units are idled.

"Spurred by fat profit in the sector, lots of coal-fired projects started building in 2015," pointed out Yuan Jiahai, professor of North China Electric Power University. "Local governments also wanted to drive GDP by funneling huge investments into the power sector."

Statistics shows coal-fired projects that passed the environmental assessments reached 150 GW in 2015, equivalent to the total amount in the past three years.

When these projects were set up and came online, their surged demand for thermal coal can't be covered in a short time, which still not be completely addressed today.

Hu Zhaoguang, head of China Electric Power Promotion Council, warned strict de-capacity measures are necessary in the power sector.

Data from the National Energy Administration showed about 2.4 GW outdated power capacity had been shut down across the country in the first three quarters this year.

Gao Shixian, director of the Energy Research Department of the National Development and Reform Commission, said M&A between coal and power enterprises can reduce middle links and fend off negative factors like speculative hoarding aimed to push up prices.

In addition, long-term supply contracts between the two parties can also avoid the risks of price fluctuation in the spot market, which are always being encouraged by the government.

In the China Coal Trade Conference 2018, large power plants have signed mid- and long- term supply contracts with major coal miners totaling 130 million tonnes.

(Writing by Alex Guo  Editing by Harry Huo)
For any questions, please contact us by or +86-351-7219322.

Share this article
Connect with us

Editors Recommendations

1 China to take half of global LNG demand this yr, Wood Mackenzie 2018-10-17

China broke a record of liquefied natural gas (LNG) demand in 2017 and is on track to break another this year, according to Wood Mackenzie, which may bring good opportunities for new LNG projects for

2 Xinjiang Sep wind power output up 18% YoY, curtailments down 23% 2018-10-17

Northwestern China's Xinjiang autonomous region registered a good run in wind power generation, with output and capacity utilization rising and idling volumes falling from a year ago, data from the re

3 China coke prices on new round of rise; coking coal market well supported 2018-10-17

It seems that the second bout of price hike in October has kicked off after some producers in Shanxi raised coke prices by another 100 yuan/t on October 15, following 50-100 yuan/t hike days ago, yet

4 China plans to drill 2nd combustible ice well in Nov 2018-10-17

Following the first well of natural gas hydrate in South China Sea, China is planning to set out a second well of this kind in November to further evaluate the commercial potential of the submarine re

5 China Coal Daily Track (Oct 17) 2018-10-17

Thermal coal Domestic market Production area Coal miners in Inner Mongolia and Shaanxi were planning to adjust up their selling prices again due to active pre-winter restocking

6 Chinese thermal coal market further heats up, trading volume increases 2018-10-17

China's spot thermal coal market kept strength on talks of coal transport restriction in eastern China early next month when the Shanghai International Import Expo convenes. The news stoc

7 China utilities less affected by coal import curb, traders 2018-10-17

China's control on coal import by power plants seemed not as stringent as expected, according to some traders participating in import business as some power majors still issued tenders recently.

8 Shanghai CIIE expected to shore up thermal coal prices 2018-10-16

The upcoming coal transport restriction during China International Import Expo in Shanghai is likely to shore up China's thermal coal prices, due mainly to possible in-advance replenishment triggered

9 Caofeidian Group establishes 1st inland transfer hub in NE China 2018-10-16

An opening ceremony was held on October 12 for the first inland Manzhouli transfer hub in northeastern China by Caofeidian Port Group, co-organized by Tangshan and Manzhouli municipal governments.

10 Fewer coal trades concluded as offer prices further climb up 2018-10-16

China's spot thermal coal market witnessed poor trading activities at the beginning of this week after a rapid price increase last week, which made traders wary of taking positions. One T

Most Read Articles

1 Ganqimaodu Jan-Aug coking coal imports at 26.56% of China's total 2018-10-08

Ganqimaodu border crossing in China's Inner Mongolia imported 11.59 million tonnes of coking coal from the neighboring Mongolia over January-August this year, falling 1.76% from the year-ago level but

2 Continued import curbs and short supply underpin China coal prices 2018-10-11

China's port thermal coal prices were well propped up by persistently tight controls on imports alongside production constraints at mines for environmental clear-up. Relevant government d

3 China spot thermal coal prices close to 650 yuan/t; import curbs likely to remain 2018-10-09

China's thermal coal market moved steadily upward after the weeklong National Day Holiday, with many spot coal traders elbowing up offer prices, pushing up spot price of 5500 Kcal/kg NAR thermal coal

4 QHD port stocks fall to half-yr low; bullishness shines in Chinese market 2018-10-11

Coal stocks have tumbled drastically to below 5 million tonnes at northern China's Qinhuangdao port recently, paving the way for a likely coal price rise in the future. Eyeing such

5 Shanxi to cut coking capacity, coke output to cut toxic emission 2018-10-10

Shanxi province, a major coal mining hub in northern China, vowed to cut coking capacity and annual coke output, according to a government statement on October 9, in line with a long-term drive to red

6 China's QHD port remains irreplaceable to coal shipment 2018-10-11

China's Qinhuangdao port, as a barometer of thermal coal market and stabilizer of coal prices, is proven irreplaceable to coal shipment, mainly a transfer center for cargoes from production areas to c

7 China Sep coal imports decline as demand falls 2018-10-12

China imported 25.14 million tonnes of coal in September, falling 7.18% from the year prior and down 12.35% from August, showed data from the General Administration of Customs (GAC) on October 12.

8 Mongolia Sep coal exports soar 55.38% on yr 2018-10-12

Mongolia exported 3.58 million tonnes of coal in September, soaring 55.38% on the year and 20.09% on the month, data from the National Statistics Office showed. In January-September, coal

9 India's coal import rises 35% to 21.1 mln T in Sep 2018-10-08

India's coal import increased substantially by 35% to 21.1 million tonnes in September, as against 15.61 million tonnes in the corresponding month previous fiscal. The rise in imports comes at a time

10 Peabody Energy to shut parts of Queensland mine after fire 2018-10-12

Coal miner Peabody Energy said on October 11 it intends to permanently seal the area where high methane levels have been concentrated after it reported fire in parts of its North Goonyella mine in Aus