Power firms decry proposed coal ban

The county's five major power generation firms have joined the protest against a ban being considered on imports of low-grade coal, the official Shanghai Securities News reported Thursday, citing unnamed sources.

China Huaneng Corp, China Datang Corp, China Guodian Corp, China Huadian Corp, and China Power Investment Corp, the nation's five biggest power generation firms, plan to file a joint letter with the National Development and Reform Commission protesting the low-grade coal ban.

The ban is being considered by the National Energy Administration (NEA), which gathered relevant enterprises in the coal sector in early May to seek suggestions on draft rules enforcing the use of quality coal, but has since faced complaints from major coal producers and coal importers, according to the newspaper report.

The five major power producers, which question the environmental benefits of the ban, said the move would be out of compliance with the government's commitment to opening the economy to market forces, said the report.

None of the firms could be reached for comment Thursday.

Power plants would take a hit if the plan is put into place, as coal-burning plants have been reliant on imports of low-grade coal, mainly from Indonesia, to reduce power generation costs, Guan Dali, a coal analyst with market intelligence firm chem365.net, told the Global Times Thursday.

An unidentified staffer with one of the five power generation firms was quoted as saying in the report that power companies will suffer big losses once the rules are announced, claiming that environmental protection is simply a pretext for the government to enforce the ban in an effort to strike a balance between coal producers and power plants.

A faltering recovery of the economy has taken a bite out of the coal industry, which has seen rising stockpiles due to sluggish market demand, as a result of which coal prices have largely maintained a downward trend.

The latest one-week statistics from the Bohai-rim thermal coal price index, a benchmark index of power-generating coal, showed that prices of coal with calorific value of 5,500 kilocalories per kilogram fell further to 610 yuan ($99.43) per ton from May 23 to 28, according to the Qinhuangdao Ocean Shipment Coal Market.

Liu Dongna, an industry analyst at Shandong-based commodity consultancy Sublime China Information, forecast a rebound in coal prices starting in September, when demand for electricity reaches its annual peak, but said there won't be a significant recovery in coal prices if the economic outlook continues to be sour.

The strong protest from power plants, and especially coal importers, which are set to take the brunt of the import ban if the NEA plan goes through, may have policymakers halting or changing their plans, Liu predicted.