Coal prices to rise by 3% on lower supplies

The industry analyst UOB Kay-Hian Ltd has predicted that power-station coal prices in China will rise 3 percent in the fourth quarter from the previous three months, as utilities increase stockpiling amid a drop in supplies.

Benchmark thermal coal with an energy value of 5,500 kilocalories per kilogram at Qinhuangdao, China's largest port for the fuel, is estimated to climb to an average of 650 yuan ($103) a metric ton, said UOB said in an analyst note on Thursday.

Electricity plants are building inventories before maintenance on the nation's biggest coal-transport railway, while domestic output fell last month and imports may be curbed by a narrowing gap between local and overseas prices, it added.

Helen Lau, UOB's Hong Kong-based analyst, said: "We believe coal prices are set to recover. The number of coal ships queuing up at Qinhuangdao port reached 137 vessels in mid-September, implying that power plant restocking demand has resumed. Imports will still be dampened going forward, implying coal imports may be weighed down."

Qinhuangdao coal was unchanged for a third week in a range of 625 to 635 yuan per ton as of Sept. 17, according to the China Coal Transport and Distribution Association.