THE world’s busiest coal port used to be Newcastle, England and then Newcastle, Australia. Now it is Qinhuangdao, 300 kilometres east of Beijing on the Bohai Sea.

The amount of coal shipped out of the Bohai Sea each week is almost equal to the rest of the world’s seaborne coal trade. Most of those ships feed power generators around Shanghai and southern China.

A small fraction will be exported to Korea and Japan, where it will compete with Australian miners. The price of Newcastle coal will hinge on those Chinese exports.

And the volume and price of Chinese exports will depend on whether China’s coal consumption is marginally more or less than the 2.7 billion tonnes of coal the country is likely to produce this year.

Ten days ago the benchmark Qinhuangdao coal price was 880 yuan per tonne, or $US129, down a bit from the mid-year peak but still $US4 higher than the current Australia-Japan contract price.

At first glance that seems like unambiguous good news for Australia. Coal is by far Australia’s most important export, on track to reap $US48 billion this financial year. That’s one-sixth of all Australian export revenue.

So far, coal prices have seemed sticky on the way down. But nothing in China’s coal industry is as it seems.

Half of China’s thermal (electricity-generating) coal is discounted to subsidise electricity producers. The most widely quoted market price is the Datong Qinhuangdao coal index, but it’s a made-up number.

Coal traders and analysts say they are not aware of sales being made at anywhere near recently quoted prices. Some suggest the local port authority is reluctant to show coal prices are collapsing lest people get the impression that China’s coal-powered economy is in trouble.

On Thursday Qinhuangdao officials dropped the price index to 790 yuan. The word is that next week it will be down to a little over 700. But officials cannot keep pace with how fast spot market prices are really falling.

“There was a report last week of a trader offering 500-600 yuan at Guangzhou, but he couldn’t sell it,” says Mark Dougan, who heads the Beijing office of coal analysts Barlow Jonker, now part of the Wood Mackenzie group.

Barlow Jonker’s daily price checks suggest very few spot sales are being done.

Traders who were selling at well above 1200 yuan three months ago cannot make a sale above 500 yuan. Stocks at Qinhuangdao have grown to a record 9 million tonnes. Buyers are waiting, sellers are panicking and the electricity generators who are the world’s biggest coal consumers are slashing production.

Find More Other News : Coal, Company, Exploration, Mine Trade & Market, Mining Finance, Mining Investment