Thursday, June 5, 2008

Two Chinese provinces move to limit thermal coal prices

BEIJING, June 5 (Xinhua) -- The governments of Shandong and Shaanxi, two of China's major coal-producing provinces, have stepped in to keep local power coal prices stable amid a national shortage.

The Shandong provincial government has issued an urgent circular, urging local producers to maintain thermal coal reserves sufficient for more than 15 days.

The government ordered producers to fulfill all existing contracts in June and produce an extra 2.56 million tonnes each month during the next three months while cutting prices by 10 yuan (1.4 U.S. dollars) a tonne from the June price.

Coal producers in the eastern province were told not to raise prices for local power plants as the government had decided to "temporarily intervene" in coal prices.

The vice governor of northern Shaanxi Province said last week that local coal companies, especially large coal chemical industry groups, should not raise prices before Sept. 15, even though demand would increase during the summer power consumption peak.

Other coal-producing provinces and regions including Shanxi, Henan and the Inner Mongolia Autonomous Region have not announced price curbs.

Provinces that were short of coal would probably also soon introduce price intervention policies to check outflows of local coal resources and move to increase purchases from other provinces, said Li Dagang, an industry analyst with Essence Securities.

He said it wasn't very likely that the central government would impose a national price ceiling on thermal coal, since if it had been planning to do so, that would have happened in April, when reserves fell below seven days in some provinces.

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