* Chinese thermal power plant use rate just above 50 pct
* Coal for power dipped in 2014, expected to drop again
* Analysts see demand downturn ahead as China restructures
By Jacob Gronholt-Pedersen and David Stanway
SINGAPORE/BEIJING, March 27 China is reducing
coal use for power generation faster than expected as the use of
cleaner-burning fuels and slowing economic growth drags thermal
utilisation rates to a potential record low, implying imports
and prices will fall further.
Beijing said this month it will go all out to curb its
addiction to coal to reduce pollution, raising fresh doubts
about demand from the world's top consumer of the fuel just
after imports slumped a third in February from a year ago.
Clean-fuel policies, as well as an economy growing at its
slowest pace in 25 years, are driving lower coal use, with power
companies using a greater mix of hydro, nuclear and renewable
options, especially wind.
Coal still makes up nearly two-thirds of China's energy mix,
but utilisation rates at thermal power plants - nearly all
coal-fired - have dropped to 52.2 percent in the first two
months of this year, Reuters calculations based on monthly power
generation and consumption figures show. If that rate holds for
the full year, it would be a new annual low.
"The demand situation in China has deteriorated over the
last few months much faster than we had expected," said Georgi
Slavov of commodity brokerage Marex Spectron.
Last year, utilisation rates at China's thermal power
generators fell to a lowest-ever 53.7 percent, down from 57.3
percent in 2013 and resulting in coal for power use dropping 18
million tonnes or 1.3 percent last year compared with 2013.
Many analysts said until recently China's coal-burning would
soar into the 2020s as its effort to cut pollution was secondary
to industrial growth. This consensus has shifted since Beijing
started taking ever more aggressive steps to rein in coal use.
"China's impact on global energy markets will be transformed
as its oil and coal consumption growth slows fast," Barclays
said in a report this month.
COAL PRICE SLUMP
"In 2014, Chinese coal imports decreased year on year for
the first time in many years, and the prognosis is for more of
the same, at least, in 2015," French bank Societe Generale said
last week in a report.
China's coal imports fell 11 percent in 2014 compared to the
previous year, the first annual decline in at least a decade.
The market is taking note. Australian coal prices
- a benchmark for Asia - slumped 30 percent last
year and dropped below $60 a tonne this month to the lowest
level since May 2007. Producers are now holding back shipments
to China amid uncertainty over quality checks under new ash and
sulphur restrictions imposed in January.
Coal used for power in China last year totalled 1.34 billion
tonnes, down from 1.36 billion in 2013, though still far higher
than any other nation.
Chinese power plants have burned 3.63 million tonnes of coal
per day in the first two months of this year, according to
Reuters calculations, down from an average 3.66 million tonnes
per day last year and 3.71 million a day in 2013.
Coal use last year accounted for 64.2 percent of China's
energy consumption, down from 66 percent in 2013, and the
country aims to pull coal's share of total energy use below 62
percent by 2020.
Utilisation rates at China's thermal power plants - fired by
coal, natural gas and oil - are set to fall further this year,
according to the China Electricity Council, with Beijing aiming
to raise the share of non-fossil fuels in primary energy use to
15 percent in 2020, up from 11.2 percent last year.
(Additional reporting by Sonali Paul in Melbourne; Editing by
Henning Gloystein and Tom Hogue)