The coal shortage problem in China is becoming more serious, and rising coal prices, and the difficulties involved in coal transport across provinces may result in many power stations having to halt production in winter.

Power stations in Hunan, Shanxi and Guizhou provinces normally have coal inventory of 30 days' consumption. In 2011, power stations in these provinces are not as willing to store as much coal as they did before with some having coal inventory for only 10 days of consumption.

An executive from Heilongjiang Longmay Mining Group said following the low season of July and August, the price of steam coal traditionally rises in September as it is the season for coal storage in preparation for winter. The price of 5,500 kilocalories steam coal at Qinghuangdao Port had started to rise from end August and had risen for two consecutive weeks, entering into a new round of price increases.

According to a people in charge of a large power station in Linfan, Shanxi province, the price of 4,500 kilocalories steam coal had increased to CNY 500 per ton up by CNY 20 to CNY 30 from two weeks ago. Coal accounts for 80% of the total operating cost of a power station and the rising coal prices meant zero marginal profits for power stations.

(Sourced from Economic Information)