Since the start of May, China's coal market has been trapped in recession, featured by slumping coal prices, mounting inventories and lackluster trade. In June, coal prices declined at a rate of 20 yuan per tonne a week.

The prolonged downturn in Chinese coal market is mainly attributed to the following four reasons, according to industry experts. First, the unfolding international financial crisis and European sovereign debt crisis has put Chinese export-oriented enterprises under pressure and their shrinking use of power resulted in lower coal consumption.

Second, the growth in coal demand failed to adapt to that in supply of the fuel against the backdrop of the slowing economic growth in China, indicating weak momentum for potential coal price rises.

Third, China has seen rapid expansion of capacity in coal industry over the past years. Statistics show that investment in China’s coal sector during the 11th Five-Year Plan period (2006-2010) totaled 1248.97 billion yuan, 5.54 times more than that during the 10th Five-Year Plan period (2001-2005). Fourth, the burgeoning new energy industry presses down the development of fossil energy, coal in particular.

The Chinese government is projected to spend 5 trillion yuan on new energy investment by 2020. The installed generating capacity is expected to hit 290 million kilowatts, equal to power generation for burning around 700 million tonnes of coal.

Source - www.steelhome.cn/en

(www.coalguru.com)