Coal prices take nosedive as Chinese demand recedes

China has increasingly played a role in influencing global coal prices, as the country has become a net importer. This about turn is due to efforts to curb the horrendous safety record of mines in Shanxi province, the main producing area, by closing illegal and dangerous mines. China bought 50 million t in the first half of 2010, showing an increase of 130% on 2009 levels. Coal prices in the port of Newcastle in Australia are a good indicator of Asian demand, and have dropped to US$ 91 per tonne; down from a high of US$ 100 in May.

Surging hydroelectric power supply and an increase in domestic coal production has caused a price drop of 10% in global prices. Beijing is also shutting down obsolete industries by the end of September in order to reduce China’s energy intensity and meet its target to lower energy intensity by 20% by 2010. This has put further downward pressure on coal prices.

Thermal coal powered plants have reportedly got higher stockpiles this year as they are burning less. Mining executives have said that China will buy between 85 – 90 million t of coal this year as opposed to the 100 – 105 million t that they were expected to buy. 

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