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Calls for coal production cuts as prices fall

By Si Tingting (China Daily)
Updated: 2008-11-25 13:12

Qinhuangdao coal prices have fallen 25 percent in two weeks as coal miners call for a coalition to cut production.

Coal prices in Qinhuangdao port, China's largest coal port, dropped by 25 percent over the past two weeks. Analysts are warning coal producers to cut production in case the decline in demand drives the coal price down still further, according to a report in today's China Securities Journal.

Citing statistics from the China Coal Transport and Distribution Association, the Journal says the average price for steam coal over 5,500 kilocalories dropped to 570 yuan per ton on November 24, 25 percent lower than that of two weeks ago.

"With the lackluster demand for electricity, contract coal would satisfy the need of power plants and no one will buy coal from the spot market. I firmly believe that the coal prices will fall further next year," says a Shanghai-based coal industry analyst.

Traders and analysts say if coal producers do not take action to cut production, there will be a coal supply surplus next year.

"Many metallurgy enterprises and chemical plants are cutting production by 30 to 40 percent, I think coal producers should cut production by at least 15 percent," says Shi Hongliang, sales director of Jiaozuo Coal Industrial Group. "If we don't cut production now, we will witness a coal supply surplus soon next year. China might have to cut production by 0.4 billion tons next year," he added.