Shenhua price cut boosts power firms
Mainland power firms surged yesterday on speculation the country's largest listed coal producer, China Shenhua Energy, has cut its asking price for this year's contracts, as well as news of lower spot market prices and higher inventory at a key port.
Shenhua Group, the parent of China Shenhua, had verbally agreed to cut its quoted price on this year's seaborne coal contracts by 50 yuan (HK$56.72) a tonne to 490 yuan, China Business News reported, citing a power firm's contract negotiator.
A coal sector analyst said China Shenhua's average seaborne coal selling price was 480 yuan a tonne last year, implying the price increase it sought may have fallen to 2.1 per cent from 12.5 per cent.
China Shenhua's spokesman declined to comment on the company's price negotiations.
Coal accounts for about 70 per cent of coal-fired power generators' operating costs and is the biggest factor affecting their profits.
The power generation sector was mired in big losses last year as two power price increases last year by the government came too little too late to make up for steep rises in coal prices.
The share rally was led by China Power International Development, which rose 8.39 per cent to HK$1.55.
China Resources Power Holdings surged 7.24 per cent to HK$15.10 and Huadian Power International 4.24 per cent to HK$1.72.
Talks have been at an impasse since December, as coal producers have reportedly asked for a 100 yuan a tonne increase while power firms wanted a 50 yuan cut.
Spokesmen at two listed mainland power generators said the five national coal generator groups had not signed any coal contracts.
However, a Credit Suisse research report on Tuesday suggested about 80 per cent of China Shenhua's annual contracts had been settled, likely at a 10 per cent price increase.
Meanwhile, higher stockpiles at the northern coal port of Qinhuangdao saw the spot price of Shanxi premium coal, with a heating value of 5,500 kilocalories per kilogram, fall to about 570 yuan a tonne on Monday from 577.50 yuan a week earlier and 600 yuan in early January.
Inventory at the port rose to 7.38 million tonnes on Saturday from 7.01 million tonnes on February 6, the China Coal Transportation and Development Association said.
Analysts said a renewed decline in spot prices on expectation of weak power demand did not favour coal producers in contract negotiations.
As coal miners want 100 yuan per tonne more, power firms seek a cut of, in yuan: yuan 50