China looks to exports as domestic coal demand droMon Dec 29, 2008 4:33am EST
SHANGHAI, Dec 29 (Reuters) - China allocated a bumper volume in its first batch of 2009 coal export quotas, as evaporating domestic demand prompted it to divert excess supply to global markets, where demand is dampened by the gloomy economy.
The world's second-largest energy user handed out the quotas at 26 million tonnes, about half of next year's total, with its top two coal exporters, Shenhua Group and China National Coal Group, each getting 10.7 million tonnes, traders said on Monday.
China has been cutting down on exports in the past few years, to keep more coal at home.
The government delayed issuance of the first and second batches of quotas this year, as the country suffered power shortages, partly triggered by coal shortages.
The timely issue of the first batch of quotas for next year also showed China's willingness to export, as coal demand has fallen on a weakening economy in the past few months.
"It's a pretty good figure if you look at the past couple of years' export quotas," said a Beijing-based trader.
But coal may be a hard sell due to the global financial crisis, analysts said.
"The quantity is aplenty, but it is a question how much will eventually be shipped out," said Wenwen Wang, an analyst at JP Morgan. "If the global economy continues to be gloomy, coal exports are unlikely to improve."
China exported nearly 41 million tonnes of coal in the first 11 months, down 14 percent from a year earlier, official customs data showed.
The country has so far issued 47.7 million tonnes of coal export quotas this year, but some traders expected an additional 5.3 million tonnes to be handed out, so that the volumes would match next year's quotas estimated at around 52 million tonnes.
But since there was still more than enough left from the second batch of this year's quotas, a third batch would have no impact on China's coal exports this year, they said.
COAL CONSUMPTION SLOWS
China's 2008 coal usage is expected to rise only 4.5 percent from a year earlier, to 2.74 billion tonnes, growth that is 5 percentage points slower than the 2007 rate, due to weakening economic expansion, said Zhang Guobao, head of the National Energy Administration of China, in remarks published on Monday.
Coal stocks at China's five major power generating groups surged to a record-high of over 50 million tonnes at the beginning of December, enough for one month's generation. Prices of coal have been declining for months. Spot prices for coal with calorific value of 5,800 kcal/kg have fallen nearly 58 percent from three months earlier, to 620-640 yuan ($90.60 -$93.52), at Qinhuangdao, China's top coal shipping port. "The downward trend in the domestic consumer price index and falling international prices for major staple energy commodities provide an opportunity and room to normalise the pricing mechanism for coal used in power plants," Zhang said.
Coal-fired power plants are expecting huge losses this year, as they are squeezed between high coal prices and government-set power tariffs, which have lagged the pace of rising coal costs. The nation's top five power groups failed to reach agreement with coal miners on next year's supply talks after a week of discussions in Fuzhou, capital of Fujian province, the official China Securities Journal reported on Monday. [ID:nSHA272250] Zhang also called for development of more alternative energy projects, such as nuclear power plants and wind mills. China's wind power capacity has made a great leap in 2008, with the total capacity expected to reach 10 GW by the year end, up two thirds from a year earlier. The nation aimed at expanding the wind power capacity to 100 GW by 2020, more than tripling a target published a year ago. [ID:nPEK297640] ($1=6.843 Yuan) (Editing by Ramthan Hussain)