Supply shortages and insufficient transport capacity drive domestic spot coal prices up 20% per month

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Supply shortages and insufficient transport capacity have led to a 20% monthly increase in domestic spot coal prices. 2008-01-29, China Chemical Information Network. Analysts at Guojin Securities say that the rise in coal contract prices in 2008 indicates an increasing degree of marketization in coal pricing, which in turn drives up the prices of spot coal. Data released by the National Development and Reform Commission yesterday showed that China’s sea freight prices for coal rose slightly in December last year, though the rate of increase has been slowing down. However, the industry expects that coal shipping prices are likely to continue rising in the near term. Against the backdrop of supply falling short of demand and transportation constraints, spot prices for various types of coal in China are currently seeing astonishing increases. Yesterday, the latest report released by the China Coal Transport and Marketing Association showed that coal prices have risen by nearly 20% on average over the past month, reaching a record high. At the same time, coal transportation costs along China’s coast have also risen by more than 50% within half a year, and the industry expects that these increases are likely to continue in the future. 　　Coal prices have risen across the board. Yesterday, the latest price for Qinhuangdao Datong blended coal at delivery was 645 yuan per ton, up nearly 20% compared to 540 yuan per ton on December 24 of last year. 　　The prices of other types of coal also showed a significant upward trend following last month’s peak in coal consumption in China. For example, the price of 5,500-kcal premium blended fuel in Shanxi reached 595 yuan per ton yesterday, compared to 515 yuan per ton in December last year ； The prices for regular blended coal and Shanxi high-blended coal are 440 yuan per ton and 550 yuan per ton respectively, representing increases of 22% and 20.8% compared to the prices on December 24 of last year. 　　The general manager of a fuel company in Shenzhen told the First Financial Daily that the company supplies coal for boilers to local enterprises, and currently, 5500-kcal thermal coal is available only at a price with no supply available. \"The contract price we agreed on was 680 yuan per ton; we have already paid the money, but at the end of last year the seller informed us that coal from local areas could not be delivered to Shenzhen in order to ensure supply for local power companies.\" The situation remains the same now, or even worse. ” The person said that the company used to supply coal for boilers to some enterprises in Shenzhen, but it no longer does business there. 　　Analysts at Guojin Securities said that the rise in coal contract prices in 2008 indicated an increasing degree of marketization in coal pricing, which drove up spot coal prices further. Last year, the average increase in the price of contract coal in our country was 10%, and senior officials at China Coal Energy also expressed optimism regarding an upward trend in coal prices in the future. 　　Sea freight costs for coal have soared by 50% in half a year. Before 2007, the contract price for shipping coal was around 40 to 50 yuan per ton, but now the market price has reached as high as 109 yuan per ton. According to Guotai Junan’s projections, the prices for transporting thermal coal along the coast are set to rise further. Currently, the main model for coastal thermal coal transportation is to sign contracts for one year or longer. The coastal coal transportation contracts of most companies that expired at the end of 2007 are now up for renewal, and new contract rates are expected to increase significantly. 　　Data released by the National Development and Reform Commission yesterday showed that China’s sea freight prices for coal rose slightly in December last year, though the increase has been slowing down. 　　However, the industry expects that coal shipping prices are likely to continue rising in the near term. 　　At the end of December last year, the coal shipping rates for ships with a capacity of 20,000 to 30,000 tons heading from Qinhuangdao to Shanghai and Ningbo reached 110 yuan and 115 yuan per ton, respectively; while for ships of that capacity going to Guangzhou, the rate was 165 yuan per ton. Last July, the coal shipping rates for ships with a capacity of 20,000 to 30,000 tons traveling from Qinhuangdao to Shanghai, Ningbo, and Guangzhou were around 75 yuan, 77 yuan, and 100 yuan per ton respectively. Coal freight rates saw an increase of over 50% within the first six months of last year. 　　In early January, COSCO Haiseng signed a 2008 Hainan thermal coal transportation contract with a long-term client. The company stated that the contract freight rate was 79% higher than the freight rate for coal transportation under the company’s contract in 2007. 　　Guotai Junan estimates that there is significant room for an increase in coal contract freight rates in the future. Among them, the prices for coastal coal transportation by Ningbo Marine may increase by around 40% to 50% this year.