China to Strengthen Cap on Coal Price Increase

China urged local regulators to tighten controls on coal price increases to help power producers cope with rising fuel costs, the National Development and Reform Committee (NDRC) said in a statement on Thursday.

Prices for thermal coal at major ports, including Qinhuangdao, Tianjin and Tangshan, could not rise beyond the price cap set on June 19, the NDRC said.

Coal producers that continued raising prices and traders who hoarded supply to jack up prices would be punished according to the country's Price Law. Such violators would also face media exposure, it said.

The country's power producers have felt the pinch of soaring coal prices as they had to increase output to ease power shortage, which was expected to hit 16 million kw this summer.

"Coal-fired power plants, which supply 78 percent of the country's electricity, are pressured by soaring coal prices and increasing prices in electricity," Dongguan Securities analyst Yu Chunyan said.

NDRC raised the retail electricity price by 0.025 yuan per kwh on July 1. The increase, however, could only cover 15 percent of the losses in coal-fired power plants, said a Citic Securities analyst.

The top five power producers had seen their combined profits more than halved in the first half because of higher coal prices, according to the State Electricity Regulatory Commission.

To protect power plants' profits, the NDRC imposed temporary controls on the factory prices of thermal coal, capping them at a price that prevailed on June 19 through the end of the year.

The fuel prices, however, continued rising, surging 22 percent to more than 1,000 yuan (146.6 U.S. dollars) per tonne in Qinhuangdao since June 19.