China 2012 coal output to slow, oil seen flat - NDRC report

BEIJING Mon Mar 5, 2012 8:09am IST

A truck drives past as a worker sprays water at a coal pier of Lianyungang port, Jiangsu province February 26, 2012. REUTERS/China Daily

A truck drives past as a worker sprays water at a coal pier of Lianyungang port, Jiangsu province February 26, 2012.

Credit: Reuters/China Daily

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BEIJING (Reuters) - China's raw coal output is expected to rise 3.7 percent from a year ago to 3.65 billion tonnes, slowing sharply from a year ago, while crude oil production by the world's No. 2 consumer is forecast unchanged at 204 million tonnes in 2012, the government said in a work report on Monday.

The report, issued by the National Development and Reform Commission (NDRC), also said growth in total electricity output was expected to slow from double-digit rates to 7.5 percent this year to hit 5.05 trillion kilowatt hours.

The forecast growth in power output, which rose 10 percent last year, is at a multi-year low and the decline comes as Beijing tries to engineer the world's second-largest economy toward a "soft landing", with Premier Wen Jiabao saying on Monday that China aims to grow its economy by about 7.5 percent in 2012.

The lower-than-expected coal production forecast, if accurate, could be a boon for the seaborne coal market, where utilities along the coasts have increasingly turned to imports as alternative supplies.

China, which opened its last parliamentary session under the current leadership on Monday, also said it would work on a pricing reform for power, whereby it would implement a tiered electricity tariffs for residential users to "better reflect" the price of coal.

The report also reiterated earlier pledges to reform prices of refined oil products and natural gas.

With power tariffs capped at a fixed rate by Beijing, many thermal power plants have been in raking up huge losses over the past two years, as the surge in steam coal prices have far outpaced the meagre power price hikes allowed by the government.

Since 1998, China has regulated oil product prices to ease inflationary pressures, but like the power sector, that has also caused many of its refineries to sink in the red and fuel shortages to plague the nation as oil refiners are unwilling to pump at a loss.

The NDRC currently sets fuel prices using a secret formula based on a basket of crude oil prices, including the price of Brent, Dubai and Cinta, and reviews domestic fuel prices should the 22-day moving average price of the basket rise or fall more than 4 percent.

Industry experts had expected the government to introduce a new fuel pricing scheme last year, which would either shorten the adjustment period or the composition of the basket of crude to help bolster refining margins.

On agriculture, China said its total grains output was expected to stand at 500 million tonnes in 2012, down 12.4 percent from a year ago. It did not give individual breakdown for corn, rice and wheat.

Cotton production was seen reaching 6 million tonnes, down from around 10 percent from year ago.

(Reporting by Judy Hua, Niu Shuping and David Stanway; Writing by Fayen Wong; Editing by Ed Davies)

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