* Bohai-Bay index-based coal prices up 1 yuan in week to Oct. 16
* Prices still down 16 pct so far in 2013, hover near 4-yr low
* Price gains seen in check by ramped up output from mines in Q4
By Fayen Wong
SHANGHAI, Oct 17 (Reuters) - China’s steam coal prices edged higher this week on tighter supplies to post their first weekly gain in 11 months, sparking hopes of at least a short-term recovery in prices that are still hovering around four-year lows.
Prices are up as winter restocking by utilities has coincided with a two-week planned maintenance of the main coal railway, and a pick up in the economy could be buffering demand, trade sources said.
While most industry participants expect prices to tick up further through the winter months, cheaper imports and higher production by mines are seen keeping the gains in check.
Chinese domestic coal prices rose 1 yuan from a week ago to 531 yuan ($87.06) per tonne on Oct. 16, the first weekly gain since November 7, 2012, according to the Bohai-Bay Rim Steam Coal index. Domestic coal prices have dropped 16 percent so far this year and are hovering near four-year lows.
“Steam coal prices should see a slight rebound in the fourth quarter due to seasonal factors and a better economy. Hydro-power production has been fairly weak this year and output will fall further in winter, so demand for thermal power will be stronger,” said Li Ji, an analyst at Galaxy Futures.
The start of a two-week maintenance at the Daqin railway, which transports coal from the main producing areas in the north to top port Qinhuangdao, has led inventories at the port to fall 2 percent to 6.1 million tonnes in the week to October 14.
During that week, spot coal prices at the port have also climbed by 15 yuan to 540 a tonne.
After slowing in nine of the past 10 quarters, China’s economy, the world’s second largest, looks to have stabilised since mid-year after Beijing acted to head off a sharper downturn with increased spending on public housing construction, railways and tax cuts for smaller firms.
Annual economic growth is forecast to have accelerated to 7.8 percent in the third quarter from 7.5 percent in the second quarter, but the recovery could fizzle towards the year-end, a Reuters poll showed.
Reflecting an improving economic climate, China’s power consumption in September rose 10.4 percent from year ago to reach 444.8 billion kilowatt hours (kWh), the National Energy Administration (NEA) said on Monday.
China’s coal output fell 2.3 pct in August from a year ago to 300 million tonnes, as sagging prices prompted some miners to cut production. Compared to a month ago, however, production was unchanged.
But large mines typically ramp up production in the fourth quarter, while expectations of stronger prices ahead may also lead smaller mines that had cut output to turn the tap back on, trade sources said.
“The recovery in prices may prompt an increase in domestic output. The return of cheaper imports will also pressure the local market and keep prices in check,” Li said.
And though utilities have increased winter bookings in recent weeks, most of them remain comfortably stocked, trade sources said.
Average coal stocks at the six major Chinese power plants have fallen to 19.7 days worth of consumption as of October 11, down 1.58 days from the preceding week, according to data from China Coal Transport and Distribution Association.
$1 = 6.0995 Chinese yuan Editing by Muralikumar Anantharaman