China chases ultra low quality, cheap coal

By Jackie Cowhig and Rujun Shen

LONDON/SHANGHAI, July 11 (Reuters) - Coal end-users in China and India have given up waiting for standard quality prices to fall -- instead seeking extremely low quality coal which matches their target prices, traders and producers said.

Chinese demand for spot Indonesian coal has risen during the past two weeks because large and small utilities are building stocks ahead of the August Olympic Games in Beijing, they said.

Many small Chinese coal mines have been shut down recently as part of a government drive to improve safety in the coal industry. In 2007 3,786 people died in coal mining accidents.

Mine closures and strong domestic demand have exacerbated coal shortages at power plants in China. In a bid to minimise power cuts during the Olympics, more imported coal is being sought, traders said.

"During the past few weeks we've had a lot more enquiry for spot coal from China. They just want whatever they can get at a certain price, they're not willing to pay the market level for their usual quality of coal," said a European trader who regularly sells spot coal to China.

Chinese buyers "started out asking for their usual medium-low quality Indonesian but they weren't willing to pay the going price so they've gone down the quality curve," another trader said. "Now they want only the lowest quality possible."

INDIA