China's coal use falling faster than expected

* 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

SINGAPORE/BEIJING, March 27 (Reuters) - 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.


“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