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China Nov power output falls 7 pct, record decline

SHANGHAI (Reuters) - China’s power generation tumbled 7 percent in November from a year ago, the biggest decline on record and the latest sign that China may be suffering even more than feared as the world economy slides into recession.

While unusually warm November weather and the asymmetrical impact of the financial crisis on high-energy industries are likely to have exaggerated the decline, analysts said the figures also underscored the worsening condition of the world’s fourth-largest economy, which is fighting hard to sustain growth.

Production from power plants connected to major grids in November fell 7 percent from a year earlier to 253 billion kilowatt hours, an industry source told Reuters on Thursday. That’s the sharpest drop since data became available in 1989.

To see a graphic of China’s power output since 1995:

here

If confirmed when official data are scheduled to be released on Dec 15, it would be the first time that power output has declined for two months in a row, suggesting things are even worse than during the 1997 Asian financial crisis.

“We have never seen such huge losses for thirty years,” said Wang Jing, a power analyst with Hongyuan Securities.

“On one hand, it suggested ongoing weak power demand from energy-intensive sectors that have been operating under capacity or even mothballed for some time; on the other hand, electricity consumption by residents might be less than expected due to warmer than usual November weather.”

Output from thermal plants sank 14 percent from a year ago to 201 billion kilowatt hours, said the source, who asked not to be named because the data have not been officially released yet.

Trends in electricity use in China are often used to help gauge economic activity and industrial operations, although the data will also be another blow to the coal market.

A shortfall in domestic coal supplies triggered the worst power shortages in years this summer, but stocks have recently grown bloated as power demand from big industries -- especially metals smelters -- has fallen amid the economic slowdown.

Benchmark Australian coal prices have dived from a record high $200 a tonne in spring to a 13-month low of $78 last week.

INDUSTRIAL OUTPUT SEEN UP 5 PCT

Yu Song, an economist at Goldman Sachs, said electricity production data and other indicators may suggest that China’s industrial growth in November slowed to 5 percent, the lowest since the monthly data series started in 1994.

“While a weakening of industrial production data is likely to be widely expected already, the magnitude of the slowdown might still surprise the market on the downside,” Song said in a note to clients.

Hongyuan’s Wang said she expects power generation to decline again in December given a strong base figure last year.

“The degree (of decline) is likely to remain fairly high,” she said. “A reversal will materialise only when energy-intensive sectors clear their stockpiles and restart their machinery.”

Total power output for the first 11 months of this year at plants connected to major grids rose 9 percent from a year earlier to 3,111 billion kilowatt hours, while thermal power output rose 7 percent on the year, said the source.

The good news for China's biggest listed firms -- Datang International Power Generation Co Ltd 0991.HK601991.SS, Huadian Power 1071.HK600027.SS and Huaneng Power 0902.HK600011.SS -- is that most are no longer losing money, as they did earlier this year when coal costs spiked.

Additional reporting by Jim Bai, Editing by Jonathan Leff

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