Although China's power consumption, which is heavily dependent on thermal generation, reaches its peak in the summer, local coal prices in many places have start to dive, the Economic Information Daily reported Tuesday.

In east China's Jiangxi Province, the coal price has dropped 10 yuan (US$1.2) per ton, and in Shandong Province, the coal price has fallen 30 to 50 yuan from the beginning of this year, the newspaper said.

In north China's Shanxi Province, a leading coal production base, the coal price for power generation dropped 20 to 30 yuan in the first half of this year.

Due to the rapid development of China's national economy as well as its fixed asset investment, coal and other energy products had been in great demand since 2003, leading to a lasting price hike.

This situation is changing, however, owing to the fluctuation of supply-demand relations, insiders said.

Since June this year, the falling trend of coal prices has become obvious in many places and in many categories of coal, Hao Xiangbin, an expert with the Coal Transport and Sales Association was quoted by the newspaper as saying.

Hao attributed the coal price drop to shrinking demand. Due to abundant rainfall this year, electricity provided by hydro-electric generators has surged in some provinces, reducing the demand for thermal power and coal products as fuels, he said.

According to an investigation by the China Electricity Council (CEC) of 422 large reservoirs in the country, on July 1 the total amount of water stored was 166.8 billion cubic meters, 21.98 billion cubic meters more than in the same period last year. 
In the first six months this year, hydro-electric generators provided a total of 155.73 billion kwh in the country, increasing 21.8 percent year on year, CEC figures show.

Hao also mentioned effective macro-control policies by the government, saying the decreasing of projects with huge energy consumption also has contributed to the shrinking coal demand.

The coal price hike in recent years has spurred township and village coal mines to raise their outputs by large margins, contributing to the oversupply problem, he said.

Figures show in the first half of this year, China's output of crude coal grew 9.7 percent year on year, with that from township and village mines jumping 15.7 percent.

Starting this year, the Chinese government lowered the tax rebate rate for coal exports as well as the tariff rate for coal imports so as to discourage exports and support imports, changing the supply-demand relations in the domestic market.

Figures from Chinese customs show in the first half year, China exported coal of 36.76 million tons, down 15.78 percent year on year, while importing 12.09 million tons, up 57.84 percent year on year, it reported.

The improved transport capacity is another factor causing the coal price drop, it said.

Although the coal price in the country has begun to drop, it is unlikely that the coal price will slump in the near future, since international demand for energy products is still robust, Zhou Fengqi, a senior consultant with the National Development and Reform Commission told the Economic Information Daily.

(Xinhua News Agency August 16, 2005)