Coal prices drop to record low

The price of 5,500 kilocalorie thermal coal at Qinhuangdao port - the major coal trading port in the country - dropped to 685 yuan ($109) from 695 yuan a metric ton this week, 27 yuan lower than it was last week, the Securities Daily reported.

This is the largest price drop since the Bohai Rim Steam Coal Price Index is published.

In November, thermal coal prices were around 840 yuan to 850 yuan a ton at the port. The buying price from power generation companies reached 1,100 yuan a ton at that time.

To cool rising coal prices, the National Development and Reform Commission capped 5,500 kilocalorie thermal coal prices at ports in North China at 800 yuan a ton since the beginning of the year.

However, prices keep falling six months after the move due to the slowing economic growth - which leads to less electricity demand - and the strong hydropower generation this year.

"Demand for thermal coal is still at a low level and coal stocks in the power plants are high," said Li Ting, analyst at the Distribution Productivity Promotion Center of China Commerce.

He said that the coal inventory at the Qinhuangdao port is at 8.9 million tons, which is still considered high.

He added that because of the weak market, coal prices are expected to keep falling.