A report in the China Securities Journal suggests that China's top five power generating groups plan to buy about 1 million tonnes of coal from Australia at around $70 per tonne on a cost, insurance and freight (CIF) basis. At that price it would be around $7 per tonne cheaper than domestically-produced coal.
"The power companies are upset at the government, who has done very little to solve the problems between coal and power sectors," said a Guangdong-based trader.
China's power plants suffered from deep losses last year, as state-set power tariffs failed to catch up with coal prices that increased at a much quicker rate.
A senior official at one of the five power companies refused to confirm the plan but said his company would buy Australian coal if prices were cheap.
The coal sold is likely to be off-specification material, such as those typically used by coking coal.
However, with freight rates from Australia to China at about $7 a tonne, this would put the FOB price of the coal at around $63 a tonne - some $17 lower than the market price. But with large stockpiles of coal after a fall in demand from global steelmakers Australian coal miners face the prospect of selling off their stocks cheaper than they can currently get on the open market and there is speculation that more deals for cheap Australian coal could be on the way.
Source: China Securities Journal
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