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High stockpiles at Chinese power plants to put pressure on thermal coal prices: Citi

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High stockpiles at Chinese power plants to put pressure on thermal coal prices: Citi

Singapore — China's thermal coal demand has been on the rise in the lead up to the summer peak season, but high inventories at power plants could continue to put pressure on thermal coal prices in the coming weeks, Citi analysts said in a note Thursday.

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The country generated a total 544 TWh of electricity in April, which is an increase of 3.8% year on year. However, this was down 4.5% from March when China generated around 569.8 TWh, according to data by China's National Bureau of Statistics released Wednesday.

"The weakness in power demand echoes tepid industrial production, which may come to an end if policy stimulus accelerates," according to the research note.

The NBS data showed that thermal power generation in April decreased 0.2% year on year. Power generation from renewable energy showed strong performance in April with hydro generation up 18.2%, while nuclear and solar energy jumped 28.8% and 13.4%, respectively.

Renewable energy including hydro, nuclear, wind and solar power accounts for 25.4% of power generation for the period of January to April, up 1.8 percentage points year on year, the data showed.

"Coal demand, despite being relatively flat year on year, has been rising heading to the summer peak season," the note said.

It added that coal inventories at power plants remain ample and could continue to put pressure on thermal coal prices in the coming weeks.

Daily power consumption in China has been on the rise in recent days from around 550,000 mt last week to around 619,000 mt Thursday due to warmer weather.

Stockpiles at major power utilities were reported to be around 16.32 million mt, enough to last for around 26 days of burn, according to China-based market sources.

S&P Global Platts assessed the most liquid Indonesian 4,200 kcal/kg NAR grade of coal at $39.10/mt FOB Kalimantan on Wednesday, down from $39.45/mt FOB on May 2.

The weakening of demand comes as the Chinese Yuan softens against the US dollar amid the ongoing US-China trade dispute.

April raw coal output growth slowed to only 0.1% year on year, with weaker growth compared with March, as intense mining safety checks likely weighed on domestic production, Citi noted.

-- Hui Min Lee,

-- Edited by Norazlina Jumaat,