Price talks dragging on for coal producers and power firms

The still deadlocked talks on coal price between mainland power suppliers and coal miners look set to drag on until after the Lunar New Year, as both sides stick to their positions amid uncertainty over where spot market prices will head during the year.

The five state-owned national power producers, pinning their hopes on spot market coal prices softening again after an easing in mid-winter demand levels, have refused to sign a single procurement contract for this year under which coal producers are asking for a price increase of as much as 17 per cent.

Power producers stocking up on fuel to prepare for higher winter fuel demand anticipate tough and drawn-out wrangling with the coal companies, as they have failed to achieve the reduced demand levels they targeted.

Coal producers have been cutting back on output in a bid to push up spot prices to strengthen their bargaining position.

The result is a rapid draw-down of inventory at the nation's largest coal port in Qinhuangdao in the north, where stockpiles fell 46 per cent to 4.99 million tonnes on Friday from a peak of 9.23 million tonnes in mid-November.

Lower stockpiles helped lift the spot price of Shanxi premium blend coal with a heating value of 5,500 kilocalories per kilogram by 17.6 per cent to 600 yuan a tonne on Monday last week ) from a mid-December trough of 510 yuan, the China Coal Transportation and Development Association said.