As China's major exporter of coal, Indonesian coal mining companies and their support services contractors should be able to reap the possible price hikes in at least three months ahead. Would the underlying "disaster" of deteriorating coal inventory in China resemble or end up with rocketing price as we have seen in the early first quarter this year due to Australian flood disaster?
Reuters reported last Friday that Steam coal prices in China climbed again to the highest level in more than two years on Friday, as a drought continues to restrict hydropower generation and utilities stock up for the coming high energy-consuming summer months. With peak summer demand, which typically starts in late June and lasts through August, still some weeks away, coal prices may head further north as power plants scramble for coal supplies. Daily prices of coal with a heating value of 5,500 kcal/kg NAR climbed to 825-835 yuan ($128.37) per tonne on Friday, while 6,000 kcal/kg coal also rose by 5 yuan to 875 yuan, according to industry data website SXCOAL. Qinhuangdao port inventory levels remained at the lowest in the year to date despite some rebound with the completion of maintenance work on the Daqin railway line showing strong demand from power plants in eastern and southern China. Coal prices have risen 7 percent since the end of March and 20 percent since last year amid surging power consumption on the back of speeding economic growth. Prices have also increased on higher production and transportation costs after Beijing lifted retail gasoline and diesel prices three times since December. About 10 percent, or 300 million tonnes of coal, are transported by truck in China. With the surge in coal prices outpacing modest increases in state-controlled on-grid power tariffs, China risks suffering its worst power crisis since 2004 with a growing list of provinces rolling out power rationing to energy intensive industries. Although Beijing is said to have allowed coal-fired power plants to charge more for electricity in some provinces, many analysts say China will need to lift power tariffs further to prevent blackouts from economic growth -- a move which would in turn cause utilities to burn more coal as they increase output. Chinese coal prices could still rise about 8-9 percent over coming months as the government raises power tariffs to encourage power production. Imports from Indonesia and Vietnam are still the most attractive. '+'
