COAL prices in China continue to fall sharply due to an enduring supply glut.
This is according to an article by Bloomberg News which cited the China Coal Transportation and Distribution Association.
Despite recent optimism following the US-China trade truce, the power fuels market remains depressed. Utilities are hesitant to purchase coal while inventories are abundant and prices declining, said the newswire.
Meanwhile, miners face pressure from local governments eager to boost revenue streams to alleviate fiscal challenges. This has created what the association’s analyst Li Xuegang described in a briefing last week an “unsustainable vicious cycle”.
The consequences are severe, with production costs now exceeding market prices in some instances. Qinhuangdao port’s benchmark price has dropped 17% this year to a four-year low of 630 yuan per tonne, severely impacting mining profitability.
Coal production surged 8.1% to a record 1.2 billion tons in the first quarter, whilst thermal power generation fell 2.3%, challenged by China’s accelerating transition to renewable energy. The planned power market liberalisation from June is expected to make clean energy even more competitive.
Coal imports are declining as they become uneconomical, though they represented just 11% of Chinese consumption last year. The industry is now looking to weather forecasts, with hopes that a hotter-than-average summer might increase air-conditioning demand and potentially slow the price decline.
