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China Coal Discount Widest in 8 Months on Floods: Energy Markets
2011-01-18 07:38:56.308 GMT
By Bloomberg News
Jan. 18 (Bloomberg) -- Chinese coal for generating power is
at its cheapest in eight months relative to Australia's after
the government in Beijing froze prices to curb inflation and the
worst flooding in Queensland since 1974 disrupted imports.
Fuel shipped from Qinhuangdao to China's south, where
demand is greatest, cost $22.90 a metric ton less than
deliveries from Newcastle, Australia, on Dec. 31, according to
Andrew Driscoll, head of resources research at CLSA Asia-Pacific
Markets. That's the biggest discount since the end of April.
Qinhuangdao shipments were an average $14.80 cheaper than
Newcastle's in the five years through 2010, CLSA data showed.
Flooding in Australia, the world's biggest coal exporter,
drove Newcastle prices to the highest this month in more than
two years. At the same time, China, the largest coal consumer,
is stepping up efforts to control inflation as its economy grows
faster than all of its major peers. The National Development and
Reform Commission, the country's top economic planning agency,
ordered contract-supply prices for coal to be kept unchanged
this year from 2010, according to a Dec. 10 statement.
"Chinese supply is quite ample and the government wants to
stabilize prices," David Fang, a director at the China Coal
Transport and Distribution Association, said by telephone from
Beijing. "The price difference between China and Australian
coal may widen a little further because Chinese prices should
remain stable at around current levels."
Lost Production
Benchmark prices for Chinese power-station coal were little
changed at $117 a ton yesterday, after falling for four straight
weeks to as low as $116 a ton, according to data from the China
Coal Transport and Distribution Association. Coal from Newcastle
rose for a seventh week, climbing to $138.50 a ton on Jan. 14,
the highest since September 2008, according to data from
Petersfield, England-based IHS McCloskey.
Australia may have lost about 1.5 million tons of power-
station-coal output because of the floods, according to data
from Macquarie Group Ltd. The northeastern state of Queensland,
where an area the size of France and Germany combined was
inundated, exports about 50 million tons of the fuel annually,
according to Macquarie.
"You shouldn't expect too much normality until well into
February," Michael Roche, chief executive officer of the
Queensland Resources Council, said in an interview on Jan. 10.
"You've got to expect that clearing water from flooded pits
will go into next month."
Dip in Imports
As prices rise, China may cut imports, according to Helen
Lau, an analyst at UOB-Kay Hian Ltd. in Hong Kong. Coal may
reach $150 a ton in "coming weeks," Joachim Azria, an analyst
at Credit Suisse Group AG in New York, said in a Jan. 10 report.
Newcastle prices may exceed $197 a ton after rainfall
intensified in Australia's Queensland, Edinburgh, U.K.-based
consultant Wood Mackenzie Ltd. said in a Jan. 14 report.
"The impact of narrowed arbitrage profit and reduced
Australian exports may lead February imports to dip" to 13
million tons, the lowest since October, Lau said on Jan. 10.
China's imports may still reach 15 million tons in January,
reflecting shipments that were booked for this month before the
floods, Lau said. The nation, which uses coal for 70 percent of
its power generation, bought an average of 13.5 million tons a
month from January to November 2010, according to the Beijing-
based General Administration of Customs. About 3 million tons, a
fifth of all shipments, came from Australia, the data show.
An economy growing almost three times faster than the U.S.
is driving Chinese coal demand. Thermal-power output capacity
may rise by 80,000 megawatts this year, the official Xinhua News
Agency said on Jan. 7. Total generation capacity reached 950,000
megawatts in 2010, Sina.com cited Zhang Ping, head of the
National Development and Reform Commission, as saying on Jan. 6.
'Appetite for Coal'
China's economy may expand 9.1 percent this year, according
to the median estimate of 18 economists surveyed by Bloomberg.
U.S. gross domestic product may grow 3.1 percent, while the euro
region's increases 1.5 percent, according to Bloomberg surveys.
"China will still have the appetite for imported coal,"
Lau said. "They will keep their import momentum high because
southern and eastern China needs to import for logistical
reasons." Overseas purchases may reach 210 million tons this
year, 30 percent higher than in 2010, she said.
Exports from Australia may recover in March after water is
pumped from mines and railroads are repaired, while a poor
weather outlook remains a risk to Queensland shipments, Bank of
America Merrill Lynch analysts led by Sydney-based Alex Tonks
wrote in a research note on Jan. 11.
QR National Ltd., an Australian rail operator, said the
Blackwater rail network that feeds into the export port of
Gladstone may open this week. Macarthur Coal Ltd. resumed some
mining, with normal production scheduled to resume in a month
provided there's no "further big rain," Chairman Keith De Lacy
said in a Jan. 10 Bloomberg Television interview.
"Qinhuangdao prices are now more competitive to Australia
but this is temporary," Lau said. "Australian prices won't go
higher forever."
For Related News and Information:
Top power stories: PTOP <GO>
Coal prices: COAL <GO>
--Chua Baizhen, with assistance from Ben Sharples in Melbourne.
Editors: Jane Lee, Justin Carrigan.
To contact the reporter on this story:
Baizhen Chua in Beijing at +86-10-6649-7561 or
bchua14@bloomberg.net
To contact the editor responsible for this story:
Jane Lee at +603-2302-7855 or jalee@bloomberg.net
