China Raises Coal Price and Reduces Export Quota

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Researched by Industrial Info Resources (Sugar Land, Texas)--Negotiations between China and importers over coal prices are at a deadlock, as China seeks to raise prices while importers attempt to loosen export limitations. Negotiators from the coal-rich province of Shanxi said before going into talks with Japan that there is little possibility of reaching a deal soon.

Reports say the snowstorms hitting China and the flooding in Australia were the main causes of the price hike. Rio Tinto (NYSE: RTP) (Melbourne, Australia) more than doubled its price of coal in February 2008 to about $130 per ton. The rapid price rising of other commodities in the international market was also referenced. In the past, China set the price of coal for Japan to match that of Australia's for Japan in accordance with that set by Australia.

China is also trying to reduce exports. In the recently issued quota, China National Coal Group Corporation (Beijing) and Shenhua Group Limited Liability Company (Beijing) were allotted 13.1 million tons each, Shanxi Coal Import and Export Group Corporation (Taiyuan City, Shanxi) got 3.2 million tons, and China MinMetals Corporation (Beijing) got 2.4 million tons. The total of 31.8 million tons is 24% less than that of 2007. The quota was 100 million tons in 2003, 80 million tons between 2004 and 2006, and 70 million tons in 2007. However, data show that China's enterprises did not use up last year's quota.

Experts say the domestic market price is higher than the international price, reducing the interest of companies to export. Some say coal is two-thirds more efficient than crude oil, and several countries are considering replacing oil with coal when the international oil price is stably above $100 a barrel.

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