Regional Coal: Chinese coal miners seek higher price in Japan: Report
Sunday, April 18 2004 - 11:42 PM WIB
The Japanese utilities including Tokyo Electric Power Co. may agree to pay about US$48 per metric ton for coal from China, said Chubu Electric's spokesman Makoto Fujimori. Yang Lieke, president of China Coal Import & Export Co., which supplies coal from Yanzhou and six other Chinese miners, is due in Tokyo today for talks on supply for the year that started April 1.
Japanese coal buyers are competing with utilities in South Korea, Taiwan and the Philippines for reduced supply. China's government in January capped exports of all coal varieties at 80 million metric tons this year, down from 93 million tons shipped in 2003, to ensure supplies to Chinese power stations and avoid blackouts that affected two-thirds of the country last year.
``We may adjust our total amount exported to Japan for this year based on the price they offer,'' said China Coal Import & Export's Vice President Zhou Dongzhou. ``Still, a significant cut for total exports is expected.''
The size of the cut to Japan will be at least proportionate to the reduction in total exports from China this year, Zhou said. China's thermal coal exports may fall to about 70 million tons in 2004 from 80.8 million tons last year, he said.
Representatives from China Coal Import & Export, the nation's largest coal exporter, are offering to ship 10.5 million tons of thermal coal at $48.30 a ton to Japan's regional electricity companies, Tex Report, an industry newsletter, said on April 6. That's 2 million tons less than they wanted, Tex said.
The price for thermal coal, used for power generation, was about $29 a ton in the previous fiscal year, Tex said.
Japanese power companies are near an agreement to pay between $40 and $45 a ton for Australian coal, compared with $26.75 in fiscal 2003, the Nihon Keizai newspaper said on its English language Web site on Saturday, without saying who provided the information.
The prices Japanese buyers accept become a benchmark for buyers in South Korea and other Asian countries. South Korean utilities agreed to pay Chinese suppliers a provisional price of $45 per ton, excluding shipping, for about 15 million tons of thermal coal, the Tex Report said on April 6.
Coal prices have risen because the region's three biggest exporters of the fuel, China, Australia and Indonesia, cut supplies. Heavy rain, strikes and worker blockades disrupted shipments from Indonesia while Australian exports fell because of insufficient railway capacity and the breakdown of a facility that loads coal onto ships.
The cap on exports to ensure supplies for Chinese utilities such as Beijing Datang Power Generation Co. reduces the benefit of record coal prices for Chinese miners such as Yanzhou.
Australian and Indonesian suppliers may benefit the most from China's cuts in coal exports, analysts including Joe Zhang, head of China research at UBS Securities in Hong Kong, said last month. Spot prices of coal from Australia's Newcastle port, an Asian benchmark, rose 50 percent to $53.94 a ton in March from December, according to the globalCOAL NEWC Index.
Power stations in Japan, Asia's biggest economy, already face oil prices that have risen almost a third in the past year. A 1995 law allows the utilities to pass fuel-cost gains to consumers six months later, and smaller customers are more likely to get higher bills since a 1999 law gave the biggest users the option to use any supplier they choose.
``Higher fuel prices can be passed onto the 60 percent regulated market but whether they will be extended to large-scale users in the deregulated sector runs the risk clients will be taken by new power suppliers,'' said Masako Kuwahara, an analyst at Standard & Poor's in Tokyo. ``It's a serious time for the Japanese electricity industry.''
Japan's 10 regional power companies increased coal purchases 41 percent over the past five years after a drop in prices since the late 1990s made the fuel less expensive than alternatives such as natural gas and oil. Japan imported 40.8 million tons of thermal coal in the year ended March 31.
``An increase in the price of coal shouldn't have a great impact on earnings as we could pass on higher fuel costs to our customers,'' said Nagoya-based Chubu Electric's Fujimori. Chubu Electric generated 25 percent of its electricity from coal in 2002, according to figures from the Federation of Electric Power Companies of Japan.
A 1995 amendment to the law governing Japan's electricity industry allows utilities to increase rates six months after a three-month period in which total fuel costs rise by more than 5 percent.
Industrial customers, large stores, offices and other users demanding more than 500 kilowatts of electricity were allowed to choose their electricity supplier starting in April, joining users of more than 2,000 kilowatts.
``Oil and liquefied natural gas prices are also high so fuel costs at all utilities will rise,'' said Satoshi Abe, an analyst at Daiwa Institute of Research.(*)