China's monthly-issued price index of power coal stood at 549.12 yuan/t in January, up 12.93 yuan/t or 2.41% month on month and 20.58 yuan/t or 3.89% year on year, showed data from the National Development and Reform Commission (NDRC) on February 12.
The power coal price index assesses domestic 5,000 Kcal/kg NAR coal on a delivered basis to power plants.
The January index has been growing for two consecutive months and reached the highest ever since the index was launched. The price rally is a mirror to the increasing conflict of tight supply and more-than-expected demand for power generation in the winter peak consumption period.
Specifically, Guangxi's price index – 756.91 yuan/t – was the highest across the country, up 0.77% on the month and 2.17% on the year; followed was Jiangxi's 751.64 yuan/t (up 2.07% MoM and 6.91% YoY) and Hunan's 718.96 yuan/t (up 3.87% MoM and 3.88% YoY), data showed.
On a month-on-month basis, Yunnan posted the largest drop of 4.1% to 467.09 yuan/t in January, followed by Jilin, down 2.76% to 543.02 yuan/t and Xinjiang, down 0.64% to 254.34 yuan/t. By contrast, Zhejiang's index rose most all over the country by 6.9% to 636.39 yuan/t, followed by Gansu's 5.37% increase to 505.24 yuan/t.
On a year-on-year basis, Yunnan (-10.12%), Sichuan (-4.93%) and Shandong (-4.02%) posted the largest index drops, while Xinjiang (43.48%), Zhejiang (17.77%) and Fujian (17.69%) registered the biggest growth in the country.
On January 31, Fenwei CCI index assessed the 5,500 Kcal/kg NAR coal at 742 yuan/t, up 5 yuan/t month on month; CCI index for 5,000 Kcal/kg NAR coal was at 674 yuan/t, up 16 yuan/t from the month prior.
Affected by rail capacity tightness that was hardly alleviated, and increasing coal demand at power plants since cold snap frequently hit the south and central regions, coal prices were soaring in the month.
Thanks to the price rallies, there were 14 coal miners soaring in net profits and 5 swinging to profit among 22 listed coal enterprises that have issued 2017 profit reports by February 13.
The 22 miners rang up 79.6 billion yuan in net profit, over half of which belong to China Shenhua Energy, the listed subsidiary of the previous Shenhua Group and the current China Energy Investment Corp.
By comparison, the increasingly high price of thermal coal not only put over 50% of power plants into losses. It also costs too much to afford enough stocks during the peak consumption time.
On January 22, four of China's top utilities asked the state top economic planner NDRC to control red-hot prices and improve coal supply, or "it will be hard to cope with extreme weather conditions that may happen during the Lunar New Year."
As a response, the central government required no sales and buys of the 5,500 Kcal/kg NAR thermal coal above 750 yuan/t FOB northern ports.
Meanwhile, large coal miners including China Energy Investment and China National Coal Corp promised to keep production during the New Year holiday and to strengthen long-term contract coal transport as much as possible in cooperation with rail and waterway departments.
Although the conflict between coal and thermal power sectors has been eased for the time being, it's still far from well solved.
"The coal-power conflict mainly stems from unreasonable margin distribution from coal mining to power selling," said chief analyst with ICBC International. "Power grid companies have enjoyed a lion share of margin in the chain."
"It's not enough to play games between the two sectors," the analyst said. "The key is to break the monopoly of the grid companies and save profit to feed miners and power generators.
(Writing by Alex Guo Editing by Harry Huo)
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