A report from the China International Capital Corporation Ltd suggests that China's coal prices will probably drop over 20% towards its equilibrium on the grounds of a recovery in coal production utilisation rates and weakened demand. CICC says that there is a great profit margin for coal enterprises at the current price, and some will very likely resume production.
China's steel plants will probably further cut production due to increasing steel inventories and steel prices that have been falling since February 2009, which will further affect coke demand. However, coal enterprises in China's major coal producing areas including Shanxi, Shaanxi and the Inner Mongolia Autonomous region hold that coal prices wouldn't slide as far as in the fourth quarter of 2008.
Coal output from major coal producing areas accounts for half of the nation's total, while trading volume takes 71%.
CICC predicted that the pre-tax power coal prices at Qinhuangdao Harbor would drop 28% in 2009, while pre-tax contractual coal prices will remain unchanged. Average coking coal prices of large coking enterprises will decrease by 24% while that of small and medium enterprises will fall 20% in 2009.
Source: China Mining
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