May 18, 2018 / 7:46 AM / 5 months ago

China's Huaneng, Huadian ban purchase of overpriced spot coal - internal document

BEIJING (Reuters) - Two major Chinese coal-fired power generators have banned spot purchases of thermal coal above certain prices as they expect the market to fall in coming months.

FILE PHOTO: A worker walks past coal piles at a coal coking plant in Yuncheng, Shanxi province, China January 31, 2018. Picture taken January 31, 2018. REUTERS/William Hong/File Photo

China Huaneng Group [HUANP.UL] and China Huadian Corp Ltd [CNHUA.UL], blamed the rally in coal prices since mid-April for “irrational market expectations”, according to internal notices from the two firms on Friday that were reviewed by Reuters and confirmed by their executives.

Benchmark thermal coal futures on the Zhengzhou Commodity Exchange have gained more than 7 percent over the past month, reaching 643 yuan ($101) a ton on Wednesday, the highest level since late February.

China’s state planner, however, says reasonable coal prices should be between 500 and 570 yuan a ton.

“Coal prices lack the momentum to jump further in May and June amid increasing coal output, high inventory at power plants and enough rail capacity for coal shipments,” said Huaneng in its notice.

Last month, China’s coal output rebounded from a five-month low in March to 293 million tonnes as miners ramped up domestic supplies after import curbs were tightened.

“We have enough inventories at our power plants, although our consumption is higher than last year. Thus, we don’t need to accelerate stockpiling at this moment,” said a senior executive at Huaneng who declined to be named as he is not authorized to talk to media.

Most of Huaneng’s coal supplies this year have come from long-term contracts with coal miners, with prices lower than spot cargoes, the executive said.

The two power generators also banned their companies from speculation on thermal coal futures market in order to “minimize market risk”, according to the notices.

Huaneng and Huadian also called on customs to speed up cargo checks to support coal imports and asked local governments to boost coal output.

Reuters reported that the eastern Chinese province of Fujian has temporarily banned foreign coal imports into the small port of Luoyan from April 1.

Huaneng and Huadian did not immediately response to a fax on the issue.

Reporting by Muyu Xu, Meng Meng and Josephine Mason; Editing by Tom Hogue

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