Don't tell the climate deniers but it looks like China is indeed taking greenhouse gas issues seriously and hurting Australian coal miners in the process. A green China means red ink for black coal.

Chinese electricity production growth isn't what it used to be but what counts more is how it's being produced as China begins to see the results of a marked swing to hydro power at the expense of coal.

For those who follow such things, China's electricity statistics released on Tuesday were less than robust August electricity production up by 2.6% on the previous corresponding month. That's not good for thermal coal demand hopes but according to Standard Bank's commodities analysts, it's actually worse than it looks.

While total electricity production in the country is still rising year on year electricity produced from thermal coal has actually declined. August electricity production from thermal coal was down 7.2% YoY. Year to date electricity production from thermal coal is down 1% compared to the first 8 months of 2011. In 2011 electricity production growth was 13.8% YoY during the first 8 months and in 2010 the YoY growth for the same period was 19.4%.

One of the reasons for the decline in the use of thermal coal in electricity production is that hydro electricity continues to increase in its share of total production. In August, hydro electricity constituted 21.6% of total electricity production up from 15% a year ago. Those figures represent a very serious investment in hydro capacity. Looks like Beijing is indeed taking carbon pollution seriously.

For local coal miners, the outlook gets worse again. With September and October seasonally weak months for electricity production, the Standard Bank team is predicting its benchmark thermal coal price falling towards USD 80 per tonne from USD 86 and USD 89 at the start of the month.

Source - SMH.com

(www.coalguru.com)