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Power shortfalls 'to persist'

By Du Juan (China Daily)

09:58, January 04, 2012

A power plant in Huaian, Jiangsu province. Power companies expect to see a "severe" power supply shortage this year, with shortfalls ranging from 8 million kilowatts (kW) to 14 million kW. (Photo / China Daily)

Coal prices 'will rebound' after government controls expire

BEIJING - China will face further power shortages this year and coal prices will likely rebound after government-mandated controls expire, according to company officials and analysts.

China Southern Power Grid Co, one of the two major State-owned power distributors, expects to see a "severe" power supply shortage this year, with the largest shortfalls ranging from 8 million kilowatts (kW) to 14 million kW.

The company said that March through May will be the three most difficult months for power supply, and Guangdong province will have the biggest shortfalls within the grid, reaching 6 million kW to 10 million kW.

To meet the rising power demand and cut coal-fired plants' losses, the National Development and Reform Commission (NDRC) said on Nov 30 that thermal coal prices at nine major ports - including Qinhuangdao, Caofeidian and Tianjin - should be less than 800 yuan ($126) a ton starting on Jan 1.

The NDRC also said that term-contract coal prices couldn't be hiked by more than 5 percent.

However, analysts said that thermal coal prices will rebound when the government lifts controls, which will probably happen after the second quarter.

"The regulation has taken effect," said Dai Bing, senior analyst at the coal-trading website coal.com.cn. The thermal coal price at Qinhuangdao, the major coal trading port in China, was 800 yuan a ton on Tuesday.

However, Dai said that it would take time to see if the government's moves had a long-term effect, as there was little supervision of industry compliance with the rules.

He said that based on experience, coal prices will definitely rebound after the government lifts the price ceiling.

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