Shenhua signs 2009 coal supply contracts

Exploration & Development

Shenhua Group, China's top coal miner, has signed term coal supply contracts for 2009 with three small power firms who will pay a little more than 10% above 2008 prices, but the country's top five power generating groups remained locked in talks with suppliers.

China's annual thermal coal price negotiations are making little headway as miners and power plants stand firm on their positions, but some smaller power generators, unable to resist pressure from coal suppliers, have concluded term agreements, industry officials said on Wednesday.

"Shenhua has signed deals with Yudean, Zhejiang Electric Power Corp and China Resources," said Liang Dunshi, deputy secretary-general of the China Coal Distribution and Transportation Association.

Shenhua's term price for coal with calorific value of 5,500 kcal/kg was less than Yn500/t (US$73.04) in 2008, industry officials said.

A Shenhua spokesman declined to comment.

Spot prices for the same grade have fallen nearly 45% from their July peak to Yn555-570/t at Qinhuangdao, China's top coal shipping port, while thermal coal price at Newcastle, Australia, a benchmark for Asia, stood at US$77.81/t last week.

China's coal-fired power plants are expected to lose more than Yn70 billion this year as state-set power tariff hikes fail to keep pace with coal costs.

Spot coal prices have fallen nearly 50% from their peak in the summer as China's power output declined on the back of dwindling demand from energy-intensive sectors in an economic slowdown.