China copper smelters plan to cut output after margins fall
The output cuts underscore the industry’s struggle with a shortage of feedstocks caused by recent mine production setbacks.
The benchmark price for power-station coal in China has chalked up its longest losing streak since 2008, declining for the ninth consecutive week.
Market pressure from high inventories and a flood of cheap overseas supply, as well as the lackluster performance of the Chinese economy were to blame for sending the average price to its lowest point in over two and a half years.
Coal with an energy value of 5,500 kilocalories per kilogram slid to 645 yuan from 660 yuan per metric ton on Sunday ($101.25 – $103), according to figures from the China Coal Transport and Distribution Association, which also noted that prices are now at their lowest levels since November 16, 2009.
Nomura analyst Ivan Lee pointed out in a report earlier this month that coal inventories are unusually high at present, with power plant stockpiles at around 27 days as opposed to 15 days under normal conditions.
PT Bahana Securities analyst Irwan Buriarto noted in June that inventories at China’s Qinhuangdao, the world’s largest coal port in terms of capacity, exceed levels last witnessed at the peak of the financial crisis towards the end of 2008, and anticipated a sustained fall in prices.
Domestic coal producers are further contributing to market pressure with ramped up output, which is set to rise by 5% a year from now until 2015. In spite of increased production at home however, China continues to purchase coal from abroad because international coal prices are now around 10% lower than the domestic levels.
