Analysis: Chinese power coal prices expected to rise in 2010  

China's market watchers are expecting higher power coal prices to result from the impending annual power coal price talks, under recovering down-stream demand and market fears of inflation.

Power coal prices have been rising for 10 consecutive weeks in China, increasing in total 16.52 percent. According to information provider Cqcoal.com, prices of 5,500-kcal coal produced in Shanxi province had hit 660 to 680 yuan/metric ton by November 23, up at least 65 yuan/ton over the beginning of October. Meanwhile, coal giants like Shenhua and Datong had raised their October prices in succession.

Wang Shuai, senior coal industry analyst at Orient Securities, said there is a great probability for power coal prices to rise next year. Citic Securities expected the prices to rise by around 5 percent in 2010. Coal producers are worrying about increased costs next year, in consideration of the market's expectation for inflation and possible resource tax reform. Market watchers forecasted that coal enterprises would transfer their costs rise to power generators in the impending negotiations.

Earlier, the National Development and Reform Commission announced an electricity price rise for non-residential use of 0.028 yuan (0.04 US dollars) per kilowatt hour on average nationwide, effective on November 20. However, most power plants in Shanxi and northeastern China are still losing money, according to an expert of the China Electricity Council, who took a negative perspective on the power enterprises' performance next year. Yet the electricity price rise had been beneficial for coal producers to take advantage of the coming power coal price talks against power generators