China Coal-Spot coal price jumps despite price freeze
SHANGHAI, June 25 (Reuters) - The spot coal price in China jumped to a record high on Wednesday despite a government order last week to cap thermal coal prices, as supply tightened with the arrival of the peak summer consumption season. The benchmark spot price for top grade 5,800 kcal/kg coal at Qinhuangdao, the country's top coal shipping port, jumped 40 yuan, or 4 percent, on Wednesday to 950-960 yuan ($138.40-139.80) per tonne, more than doubling from a year earlier. "It is already the peak season. Prices would rise anyway, with or without the price cap order," said an analyst at a large state-owned securities firm, who declined to be named. China last Thursday announced a cap on thermal coal prices through the end of the year at the June 19 level, while hiking diesel, gasoline and jet fuel prices immediately and raising retail electricity tariffs beginning on July 1. Analysts and traders believed the price cap would be temporary and would not change the upward trend in the coal price. "Traders expect prices to go up, so they are reluctant to release their coal stocks, which has caused a fall in available coal inventories on the market," said Chen Liang, an analyst at Ping An Securities. Some traders said the price cap, which only applies to mine mouth prices and leaves plenty of leeway for evasion by miners and traders, nevertheless had helped slow the rise in coal prices. "Without the price capping policy, it would rise faster," said a Qinhuangdao-based trader. Movement on the Daqin railway, which links Shanxi, the top coal-producing province, to Qinhuangdao, has been slowed since early June by annual maintenance work, said industrial officials and traders. "Coal transportation has declined due to the maintenance work, which shuts down the railway for three hours a day," said the Qinhuangdao-based trader. But some industrial officials said the routine maintenance would not seriously affect thermal coal supplies, as capacity on the line had been increased. "Transportation capacity on the Daqin route has increased by 50 million tonnes this year, to 350 million tonnes," said Liang Dunshi, deputy secretary general of the China Coal Transportation and Distribution Association. ($1=6.866 Yuan) source: Reuters 25 June 2008
