Taipower forecasts a drop in fuel prices in April

Taiwan Power Co (Taipower, 台電), Asia's biggest thermal coal buyer, said the cost of the fuel will fall after China resumes exports in April, easing pressure on buyers to settle term negotiations at double last year's prices.

The resumption of Chinese exports after a two-month ban and easing rainfall in Indonesia will boost supplies, Albert Jen (任曾平), head of the company's thermal coal unit, said at the McCloskey Group conference in Singapore yesterday.

Taipower is waiting for Japanese utilities to conclude price talks with Australian sellers before carrying out discussions with its suppliers, he said.

Coal prices climbed after heavy rains in Australia, snowstorms in China and power shortages in South Africa reduced output.

Benchmark prices at Newcastle, the world's biggest export harbor for thermal coal in Australia, dropped US$4.71 to US$134.45 a tonne in the week ended on Feb. 22 after four weeks of records, the globalCOAL NEWC Index said.

"The Japanese could delay negotiations and wait for spot prices to fall," Jen said. "The next few weeks will be crucial because the talks usually conclude in March."

Australian miners are seeking between US$125 and US$136 a tonne under one-year contracts starting in April, compared with offers from Japanese utilities to pay US$110 a tonne, Peter Ball, vice president for marketing at PT Bumi Resources, Indonesia's largest thermal coal exporter, said earlier this week in an interview. In the year ending on March 31, the price was about US$55.

The price Japanese utilities pay will be the benchmark for Taipower, Jen said. The company, Taiwan's biggest electricity producer, didn't receive supplies from China under term agreements after Beijing banned overseas sales this month and next month.

Taipower also buys from Australia and Indonesia -- the world's two biggest thermal coal exporters.

China may have resumed exports, Gao Yaokun, a Beijing-based coal trader at CC Carbon Pte, said at the conference.

"Exports have probably started even as there's no official announcement," he said. China could ship out more than 50 million tonnes this year because overseas sales are more profitable, compared with prices in the domestic market at less than US$100 a tonne, he said.

Taipower plans to import 27 million tonnes of thermal coal annually during this year and next year, Jen said.s

Purchases could rise almost 50 percent to 40 million tonnes by 2018, after it completes the construction of 12 generating units with 800 megawatts each, he said.