Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200812/20081225/article_385783.htm
Coal firms seek up to 10% more in prices
Created: 2008-12-25 0:49:34, Updated: 2008-12-25 13:02:36
Author:Fu Chenghao
Chinese coal producers are seeking a price increase of up to 10 percent in annual contracts with power firms for 2009 to reflect a higher tax and as they struggle with falling spot coal prices over the past months.
But key buyers, including five of the largest electricity producers which had suffered from higher 2008 prices and a slowdown in power demand, turned down the request, leaving the ongoing talks for 2009 contracts in a stalemate, industry officials said.
As it's already more than halfway through the week-long negotiations, which is set to end on Saturday in Fuzhou, Fujian Province, most contracts have been signed by coal users in the metallurgical and chemical sectors, according to the China Coal Transport and Distribution Association.
Major power firms have yet to sign, although three smaller power generators, including Guangdong Yudean, have agreed to pay a little more than 10 percent above 2008 prices with Shenhua Group, China's top coal miner, said Liang Dunshi, the association's deputy secretary general.
"Chances are slim that coal and power firms will reach agreement soon, as the two sides probably would protract the negotiations as they did in past years," a Ping An Securities report said. "History tells us that even though coal and power firms sign deals, we don't expect contracts to be fully executed under agreed terms."
Power firms had been hit early this year when they accepted a 10 percent rise in contract prices, and the situation worsened when some coal firms reneged on contracts and asked for more money after spot prices surged.
Some power firms are seeking a reduction of up to 10 percent for 2009 contracts, an industry executive said. The record coal inventories at power plants and slowing demand give generators leverage in negotiations.
"The longer the talks are prolonged, the worse for miners," Ping An analyst Chen Liang said. Spot coal prices in Qinhuangdao, a benchmark, almost halved from its July record, cutting earnings for mining firms which are also set to shoulder higher a value-added tax from next year.
China's power demand started to weaken in the closing months of the year and industry watchers are pessimistic as they estimate even lower growth next year.
But key buyers, including five of the largest electricity producers which had suffered from higher 2008 prices and a slowdown in power demand, turned down the request, leaving the ongoing talks for 2009 contracts in a stalemate, industry officials said.
As it's already more than halfway through the week-long negotiations, which is set to end on Saturday in Fuzhou, Fujian Province, most contracts have been signed by coal users in the metallurgical and chemical sectors, according to the China Coal Transport and Distribution Association.
Major power firms have yet to sign, although three smaller power generators, including Guangdong Yudean, have agreed to pay a little more than 10 percent above 2008 prices with Shenhua Group, China's top coal miner, said Liang Dunshi, the association's deputy secretary general.
"Chances are slim that coal and power firms will reach agreement soon, as the two sides probably would protract the negotiations as they did in past years," a Ping An Securities report said. "History tells us that even though coal and power firms sign deals, we don't expect contracts to be fully executed under agreed terms."
Power firms had been hit early this year when they accepted a 10 percent rise in contract prices, and the situation worsened when some coal firms reneged on contracts and asked for more money after spot prices surged.
Some power firms are seeking a reduction of up to 10 percent for 2009 contracts, an industry executive said. The record coal inventories at power plants and slowing demand give generators leverage in negotiations.
"The longer the talks are prolonged, the worse for miners," Ping An analyst Chen Liang said. Spot coal prices in Qinhuangdao, a benchmark, almost halved from its July record, cutting earnings for mining firms which are also set to shoulder higher a value-added tax from next year.
China's power demand started to weaken in the closing months of the year and industry watchers are pessimistic as they estimate even lower growth next year.
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