Sharp coal price rise may shock Chinese power producers

• 14 years ago (2010-04-01)
• David Flin

Asia 846

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China’s power industry may incur losses this year as rising coal prices may take the sheen off the 9 per cent growth in consumption. Coal prices have risen sharply since the fourth quarter of last year, and are eating into the profits of power plants, the China Electricity Council (CEC) said in a report. It said that coal-fired power plants and even the whole power industry will go into the red if coal and electricity price hikes are not controlled. China should, according to the CEC, look at adopting the coal electricity pricing linkage mechanism.

The Chinese government decided to approve a mechanism linking coal and power prices at the end of 2004. Under the linkage, electricity prices will move in tandem with coal price rises. If coal prices rise by more than 5 per cent over a 6-month period, the government will adjust electricity prices. However, to date, the Government has invoked this mechanism only twice.