* Top 5 utilities protest to NDRC against NEA proposal
* Proposal would have raised costs for power firms
* Faltering domestic coal mining industry had lobbied for
By Fayen Wong
SHANGHAI, May 30 China's top five utilities have
formally protested a government proposal to ban imports of
low-grade coal that could jack up their costs, a move that could
derail domestic miners' efforts to boost demand for their coal.
The big utilities have only just begun to see their thermal
power businesses turn profitable after haemorrhaging billions
over the past five years due to soaring coal prices.
China Huaneng Group, China Datang Corp, China Huadian Group,
China Guodian Corp and China Power Investment Corp are objecting
to a draft proposal from the National Energy Administration
(NEA) on banning imports of low-quality coal.
"We've lodged a formal protest with the National Development
and Reform Commission. We can't sit by and do nothing when we've
been in the red for so long," said a source at a utility, who
declined to be identified due to the sensitivity of the matter.
The NEA comes under the NDRC, the country's top economic
Beijing is caught between supporting its miners as coal
prices fall and curbing use of low-quality coal which causes
pollution, and the concerns of utilities who already suffer from
low state-set electricity prices for consumers.
The world's top consumer and producer imported 55 million
tonnes of low-grade coal in 2012, mostly from Indonesia.
The power companies and the NDRC could not be reached
immediately for comment.
The utilities said in their complaint that the NEA's
proposal, if adopted, would distort the market, raise coal
prices and have little use in protecting the environment, the
utility source said.
The proposed import ban has sent share prices of the power
firms' listed units tumbling. Huaneng Power and Datang
Power Co have dropped 10 percent and 13 percent,
respectively, since May 20, against a 4.3 percent decline in the
The NEA, in charge of researching and drafting strategies to
address China's energy needs, came up with the proposal to limit
imports after coal miners lobbied the government to protect the
The proposal is for a ban on imported coal with a calorific
value lower than 4,540 kcal/kg, sulphur content higher than 1
percent and 25 percent ash on a net-as-received basis, according
to an NEA document obtained by Reuters.
The proposal also sought to raise licensing requirements for
Chinese coal traders, including having a minimum registered
capital of 50 million yuan ($8.16 million). They also should
have imported more than 1 million tonnes of coal in the last
In their complaint, the utilities said the move would force
many coal traders to shut, eroding market competition and
causing coal prices to rise, according to a second source.
IMPACT ON TRADE TIES?
Cooling economic growth, new mine supplies coming onstream,
robust hydropower output and surging imports have sent local
coal prices tumbling to a near four-year low, causing some
miners to sink into the red and cut output.
That led the coal miners to lobby for curbing imports.
Low-grade coal became a target because it competes with a large
proportion of their production.
China imported about 290 million tonnes of coal in 2012,
against total output of 3.6 billion tonnes.
It was not clear when a final decision on the draft proposal
will be taken. The NDRC may need to consult the Ministry of
Commerce since it may affect trade ties with Indonesia, industry
Also, many coastal power plants have signed long-term supply
agreements with Indonesian suppliers and a ban would force them
to renege on the contracts.
Experts said Beijing, which wants to limit domestic coal
output at 3.9 billion tonnes by 2015, has been encouraging
imports since 2010 and the proposal goes against the broader
goal of conserving its own resources.
"The current downturn could be a catalyst to accelerate
consolidation for the coal sector. That fits with the
government's 12th five-year plan to consolidate the scattered
industry and eliminate outdated capacity," said a coal analyst,
who declined to be identified as he was not authorised to speak
($1 = 6.1267 Chinese yuan)
(Editing by Muralikumar Anantharaman)