Soaring coal prices set to hit power generators

11:55, October 27, 2010      

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Chinese power generators are likely to suffer losses this year as higher coal prices continue to erode profit margins, industry figures showed.

Hong Kong-listed Huaneng Power International, China's largest electricity provider, said on Monday that its third quarter profit fell by nearly half from the figure a year ago due to higher costs in power generation.

Huaneng, like other power producers, is facing a bleak outlook because of soaring prices of coal, which accounts for 70 to 80 percent of power generation.

Many of the State-owned power companies are suffering a 50 percent loss this year, a senior official from one of the companies said.

Qinhuangdao's coal price, considered the industry benchmark in the country, has extended gains and risen by as much as 7 percent within one month.

The price of power-station coal with an energy value of 5,500 kilocalories a kilogram rose to between 750 yuan ($113) and 760 yuan a ton as of Oct 26, compared with 710 to 720 yuan on Sept 25.

Liu Zhicheng, executive director of Bank Of China International (China), estimated that the country's benchmark coal price may increase 9 percent this year and 14 percent in 2011.

By contrast, coal supplier Yanzhou Coal Mining reported a profit that increased more than two times while its coal production rose by 38 percent in the third quarter, according to the company's statement on Monday.

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