Utilisation of the mainland’s installed power generation product capacity rebounded in the second quarter, but the profitability of the utilities sector has yet to definitively turn with it. Weaknesses in the manufacturing and construction sectors are the root causes of a lag in power utilisation of around 10 percentage points in the first half of 2014 versus the average of the last 14 years. That output gap has in turn put downward pressure on coal imports – a situation that has worried analysts at commodities broker Marex Spectron. “It is increasingly obvious that the domestic coal price will not find the floor unless we start to see stronger coal burn utilisation rates,” Georgi Slavov, head of basic resources research at the company, wrote in a note to clients. The bounce in utilisation rates to 87 per cent in June from April’s 81per cent should have been the trigger for a rebound in profits, but that has so far proven elusive.
