China's electricity regulator said Thursday that the country's power consumption growth will accelerate in 2013, which analysts said could boost thermal coal prices.
Power consumption nationwide is expected to increase by over 9 percent in 2013 from 2012, up from the 5.5 percent year-on-year growth recorded in 2012, the State Electricity Regulatory Commission (SERC) said in a statement.
The SERC said electricity consumption began to pick up month-on-month in October 2012, and saw 7.45 percent year-on-year growth in the fourth quarter of last year.
"The faster growth rate for 2013 will be driven mainly by increasing industrial power consumption," Guan Dali, a researcher with chem365.net, a Shandong-based commodity portal, told the Global Times Thursday.
But analysts said that despite growing demand for electricity, large-scale power shortages are not likely in 2013.
"Domestic thermal power plants have enough facilities to satisfy the increasing demand, so there might only be power shortages in certain areas in the peak season for power consumption," Li Ting, an analyst with the Distribution Productivity Promotion Center of China Commerce, told the Global Times Thursday.
Analysts expect thermal coal prices will rise moderately in 2013, following the market-oriented move by the National Development and Reform Commission (NDRC) to cancel its intervention in thermal coal prices.
Starting from January 1, 2013, the NDRC no longer requires coal suppliers to sell a certain quantity of coal to power companies at preferential prices that are usually far below market prices.
The NDRC is also now encouraging coal suppliers and power companies to sign longer-term contracts instead of annual contracts, in order to ensure stable supply of coal.
By Thursday, long-term coal contracts totaling 1.2 billion tons had been signed between coal suppliers and power companies, data from the China Coal Transport and Distribution Association showed.
Major coal suppliers, including Datong Coal Mine Group Co and Shenhua Group Corp, raised their long-term contract prices by 5 percent this year from last year's annual contract, close to the benchmark Bohai-rim spot thermal coal price, Beijing-based Securities Daily reported Thursday.
"The increase in coal prices will add some cost pressure for power plants, but their revenue will also increase due to growing electricity demand, so their business performance will be slightly better in 2013 than in 2012," Li said.
Guan noted that without further reform of the pricing mechanism for electricity, domestic thermal power plants will continue to lose money from the power generation business.
Heilongjiang-based power company Huadian Energy said it expects to lose 390 million yuan ($62.7 million) in 2012 due to high thermal coal prices.
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