BEIJING, Dec. 16 -- The negotiated price of electricity coal in China has seen an increase of around 10 percent at a meeting that brought together coal producers and power generation plants to settle on purchase contracts and make arrangements for transportation.

    The Shanghai Securities News reports on Friday that it witnessed several contracts at the meeting in Xianghe near Beijing. The delivery price of coal that one major Shaanxi-based coal producer signed with several power plants stands at 320 yuan per ton, up 20 percent year-on-year. Some other contracts have hiked the delivery price to as much as 350 yuan per ton.

    The price of electricity coal in the country's key purchase contracts for next year has increased by over 30 yuan per ton on average, a manager with a power plant affiliated with China Guodian Corporation, a major Chinese power producer, disclosed to the newspaper. The price increase in Shaanxi Province is between 20 to 25 yuan, in Shanxi Province over 30 yuan and in Henan Province over 40 yuan.

    Electricity generation is expected to consume 1.3 billion tons of coal next year, accounting for half of the national coal demand, the China Business Post reports. The 10 percent electricity coal price hike will put about 40 billion yuan as extra fuel costs on coal-fired power generation enterprises, the report estimates.

    An insider with Shaanxi Coal Industry Group. Co., Ltd. told the newspaper that possibility remains that the coal producers might raise price further as the country's five biggest power producers have not yet settled on the prices on their purchase contracts.

    The big-fives are China Huaneng Group, China Guodian Corporation, China Power Investment Corporation, China Huadian Corporation and China Datang Corporation.

    The report says the power groups lack effective leverage to control the price of electricity coal as the power generation plants under them, which hold the right of independently negotiating prices, are already finalizing their contracts and the price hike is anything but certain now.

    Higher coal prices will put further pressure on coal-powered electricity plants, forcing them to operate under losses and cut back on employees' benefits. The country's power industries have called for the government-set electricity prices to be pegged to coal prices. However, analysts say the peg is not likely to be realized as late as the second half of next year, considering the rising consumer price index, a main gauge of inflation in the country.

    Coal industry insiders have quoted the strained supply of coal as one reason for the price hike after the government has shut down a large number of small-scale coal mines. Moreover, the average wage of coal miners, which is far lower than that of the power plants, and newly-added taxes in the coal industry all make the case for the price increase.

(Source: CRIENGLISH.com)