Coal price rise irrational, correction expected: official

BEIJING - The recent coal price surge in China was irrational and unsustainable, an official said Monday, predicting that prices will retreat as supplies increase.

There is no basis for further rises in coal prices, as supplies, freight volume and inventories have all rebounded, an official with the National Development and Reform Commission (NDRC) told Xinhua.

Coal stocks at five major ports in north China's Bohai Rim region have risen 47.5 percent from the lows of previous weeks to 15 million tonnes, while inventories at major power plants have increased 35.4 percent to 65 million tonnes, he said.

Despite recovering supplies, coal prices are still climbing, showing that prices are out of line with fundamentals and that speculation is playing a role, the official said.

He also attributed the price increases to a government campaign to cut ineffective production and the onset of winter.

As more efficient producers fully extend their capacity and distributors put inventories on sale, supplies will further increase in winter and prices will fall, the official said.

The Bohai-Rim Steam-Coal Price Index, a gauge of coal prices in northern China's major ports, rose to 593 yuan ($87.2) per tonne last week, the 17th consecutive rise and roughly a 60 percent increase since the start of the year.

Irrational price increases disrupted the coal industry's capacity reduction and hurt the business of downstream industries, the official said.

China's five largest power companies saw their combined coal-fired business lose 300 million yuan in September, the first group loss since August 2012, due to higher coal prices.

Authorities have pledged to ensure market supply without weakening capacity-cutting efforts, deciding last month to relax the limit on production days for efficient coal producers.

The railway system has beefed up its transportation capacity, with the nation's railways carrying 160 million tonnes of coal in September, up 5.2 percent on August.

Illegal acts such as hoarding and colluding to drive up prices will be severely punished, the official said.

China plans to cut coal capacity by half a billion tonnes in the next few years. By the end of September, over 80 percent of the 250 million tonnes of capacity up for the chop this year had already been eliminated.