China Orders Price Caps on Coal Used at Power Plants (Update3)...

China Orders Price Caps on Coal Used at Power Plants (Update3)

By Wang Ying

July 24 (Bloomberg) -- China, the world's biggest coal user, ordered a cap on prices of the fuel to help power producers cope with costs as the country battles a sixth year of electricity shortages. Power companies' shares climbed.

Prices at the country's biggest coal ports, including Qinhuangdao, Tianjin and Tangshan, can't rise beyond the June 19 levels, the National Development and Reform Commission said in a statement on its Web site today.

Asian coal prices have more than doubled this year on rising electricity demand and as railroad and port bottlenecks in Australia and South Africa curb supplies. Prices at Qinhuangdao reached a record $154 a metric ton in May after China ordered the closure of small mines to cut pollution before the Olympics. The nation uses coal to generate 80 percent of its power.

``The price curbs may reduce imports and discourage smaller companies from boosting output, worsening the supply shortage,'' David Fang, a director of information at the China Coal Transport and Distribution Association, said by mobile phone from Beijing today. The curb will ``to some extent'' help power companies reduce fuel purchasing costs.''

China's power plants have been losing money because of rising coal prices and government controls on electricity tariffs. Today's announcement sent the share prices of power utilities higher while those of coal producers fell

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