Slowing economy weighs on China's coal sector

BEIJING -- China's economic slowdown has led to weak demand for coal from the domestic market and eroded the profitability of coal producers, the country's top economic planner has said.

"Weakened demand, falling prices and rising costs have squeezed profit margins in the coal sector and increased enterprises' financial pressures," according to a statement issued by the National Development and Reform Commission.

The prices of power-coal at Qinghuangdao Port, China's largest coal shipment center where prices are considered a benchmark, hovered between 625 yuan ($98.58) and 635 yuan per ton in August, down over 20 percent from the corresponding period in 2011, the NDRC said.

Prices were further depressed by a massive increase in overseas purchases. According to customs figures, China imported 185 million tons of coal in the first eight months of 2012, up 46.3 percent from the same period last year and surpassing the whole-year imports of 2011.

In August alone, however, coal imports fell 0.7 percent from one year earlier, the first drop this year, as domestic demand waned amid the economic slowdown.

With the country's economy cooling since the beginning of the year, thermal power generation, as well as metals and chemical manufacturing, have slowed down significantly, leading to flagging coal demand.

China's economy rose 7.6 percent in the second quarter of the year, the lowest rate in more than three years. On Oct 18, the nation is scheduled to release figures revealing its third-quarter GDP growth, which is widely expected to be below 7.5 percent.