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Weak coal market mirrors slowdown, transition
Last Updated: 2013-08-06 18:52 | Xinhua
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Prices of thermal coal in China, used to fire up power plants, have declined 10 percent so far this year amid an economic slowdown and gradual transition.

The latest benchmark Bohai-rim steam-coal price index showed that the average spot price at six major coal shipping ports in northern China in the week ending July 30 fell further to 570 yuan (93 U.S. dollars) per tonne, down 10 percent from the beginning of the year.

"Coal prices have fallen to five-year lows," Bu Changsen, chairman of Shandong Energy Group Co., Ltd., said. "The whole coal industry is experiencing the worst downturn in more than a decade and therefore most coal firms nationwide are mired in hard times."

Power consumption is a barometer of the state of the economy. Therefore slumps in thermal coal prices could mirror the downward pressure on the Chinese economy, economists said.

The country's economic growth slowed further to an annual rate of 7.5 percent in the second quarter, in line with the government target for the whole year. But the growth has been on a downward trend for two consecutive quarters.

Power consumption rose 5.1 percent year on year in the first half of 2013, much lower than the 7.6 percent economic growth rate during the same period, according to China's National Energy Administration.

Meanwhile, the weak coal market comes as the country is striving to cut some high polluting and energy guzzling capacity to transform the economy into a more sustainable one, said Li Tiegang, deputy president of the school of economics with Shandong University.

Official data also showed that compared with heavy industries, the new and high-tech sectors have better growth momentum and offer hope for the Chinese economy.

Currently, traditional heavy industries, like steel and shipbuilding, are faced with unprecedented challenges of excess capacity as sluggish global economic growth has dented demand, said Li.

Thirty-seven of China's 49 major steel makers reported losses in the Jan.-May period, data from the China Iron and Steel Association showed. The steel mills face operation pressures with falling prices and rising inventories.

The companies should work out new solutions as China will continue to cut its reliance on highly-polluting and energy-guzzling industries, said Zhang Weiguo, head of the economics research institute of Shandong Academy of Social Sciences.

"Facing rising debts, weak demand and price falls, the heavy industries should innovate and transform their growth model rather than wait for bailouts," Zhang said.

The Chinese government is paying more attention to the transition of the economic growth model, acknowledging that sustained economic stimulus can not completely tackle the expansion issues, Zhang said.

At a conference in mid-July, Premier Li Keqiang said that China's economy has begun a new phase as it must rely more on economic transformation and upgrading. The government should coordinate efforts of stabilizing economic growth, promoting restructuring and advancing reforms, he said.

Many companies are making changes to cope with the hard market conditions.

Huanghai Shipbuilding Co., Ltd. has 169 vessels being built or ordered with delivery dates until 2014.

"We have stepped up research and development on new products to help compete for customers and therefore we have received plenty of orders this year," said Zhao Jianping, president of Huanghai Shipbuilding Co..

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