The prices of coal traded at Qinhuangdao Port, the benchmark of the Chinese market, edged down in Jul, the traditional electricity consumption peak, which is the first drop of thermal coal prices in summer since 2007.

As of Jul 26, the floor FOB prices of thermal coal with calorific value of 5500 kcal/kg, 5000 kcal/kg, 4500 kcal/kg and 4000 kcal/kg respectively stood at 740 yuan/t, 640 yuan/t, 565 yuan/t and 450 yuan/t, all dropping 10 yuan/t from the week before.

The falling coal prices is rooted in slower-than-expected consumption in power plants under the impacts of relatively cooling weather caused by repeated rainfalls in most parts. And, the government’s restriction on energy-intensive industry also took off some electricity demand.

Data show that coal uses in key power plants averaged 3.23 million tonnes per day from Jul 1 to Jul 20, only up 5.11% or 157,000 tonnes from a month earlier.

The returning hydropower generation will directly reduce domestic heavy reliance on coal-fired power. In Jun, China turned out 70.4 billion kWh of hydropower, the monthly all-time record, growing 18.5% or 11.85 billion kWh from a year ago, or a rise of 26.0% or 14.53 billion kWh from the previous month.

High inventory in power plants and northern transferring ports is also another influential factor. On Jul 20, China’s key power plants had a total of 61.06 million tonnes coal in stock, enough for use of 18 days on average. And stockpiles at main transferring ports, like Qinhuangdao, Jingtang, and Caofeidian, also maintained at a relatively high level, respectively at 5.87 million tonnes, 2.35 million tonnes and 2.1 million tonnes on Jul 22.

What’s worse, the price of thermal coal at Australia’s Newcastle Port, the Asian benchmark, edged down to US$95.05 per tonne as of Jul 23, down 5.3% or US$5.35 per tonne from Jun 18.

Therefore, factors mentioned above together resulted in coal prices at Qinhuangdao drop in the summer peak.

Domestic thermal coal price, however, is not likely to fall sharply either in the short term, on the expectation that the demand for power-station coal may climb up again as electricity consumption peaks.