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China's early heat wave to prop up coal prices

Forecasts of a warmer-than-usual June in China have halted a decline in coal prices and pushed up demand for air conditioning, Reuters reported May 26.

According to the country's Meteorological Administration, Beijing is set to hit 96 degrees F on May 28, the report said.

The heat wave has pushed some traders to start revising their views on coal prices, which were initially projected to retreat to the 420 yuan to 450 yuan per ton range.

The shift in outlook has been further spurred by low hydropower production, which edged down 4.5% for the first four months of the year to 268.4 billion kWh on low reservoir levels, the report said.

However, Zhang Xiaojin, an analyst with Everbright Futures, said "prices will continue to fall until late June," as coal-fired power stations were able to build an average 30 days of coal stocks by late May.

"The stocks level has not pointed to a revival in prices yet," Reuters quoted him as saying.

As of May 25, US$1 was equivalent to 6.87 Chinese yuan renminbi.