China power production slows

China’s power production is expected to rise 7.5 per cent in 2012, its slowest growth since 2009, and slackening demand from thousands of power stations across the country will also curb gains in coal output, a government work report showed on Monday. The report, issued by the National Development and Reform Commission (NDRC) ahead of the annual parliament meetings, said total electricity output was expected to hit 5.05 trillion kilowatt hours in 2012, slowing markedly from the 10 per cent growth rate last year and a near 15 per cent spurt in 2010. Raw coal output from China, the world’s top producer and consumer of the fuel, is expected to rise 3.7 per cent from a year ago to 3.65 billion tonnes, cooling from the 8.7 per cent gain recorded in 2011. The moderation in power output growth, the lowest since the 6.75 per cent recorded in 2009, comes as Beijing pulls out all stop to cool its economy, with Premier Wen Jiabao saying on Monday that China aims to grow its economy by about 7.5 per cent in 2012. The slowdown in electricity consumption may not necessarily cause coal imports  to skid, as a move by the country’s coal barons to rein in supplies would help ensure that domestic prices were supported. “We could see volumes staying at pretty decent levels of around 10-12 million tonnes a month, but international prices would come under pressure as suppliers try to match Chinese prices,” said a Singapore-based trader. Crude oil production is forecast unchanged at 204 million tonnes in 2012. “The target shows that China’s domestic oil production has reached a plateau with 70-80 per cent of the fields seeing declining reserves, while there have been no major new finds to give it a big boost,” said Huang Xinhua, Singapore-based analyst with IHS Energy. China also reiterated earlier pledges to introduce energy pricing reforms this year, adding that it was looking to implement tiered electricity tariffs for residential users, while pricing revisions for refined oil products and natural gas were also in the works. Last week, the NDRC’s deputy chief of price department, Zhou Wangjun, told Xinhua that Beijing will bring in energy pricing reforms this year to let market forces will play a greater role, but will time them to limit their impact on consumer prices. With power tariffs and fuel prices capped at a fixed rate by Beijing, many thermal power plants and refiners have raked up massive losses in recent years, as the surge in resource prices have far outpaced the meagre state-controlled price hikes. 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 per cent. Since the much-anticipated review of the fuel pricing scheme did not occur last year as expected, industry experts said the reform, which include shortening the adjustment period or the composition of the basket of crude, could be unveiled this year. CARBON TRADING In a wide-ranging report, the NDRC also said it plans to roll out a pilot carbon trading scheme this year as part of the country’s broader efforts to encourage reductions in greenhouse   gas emissions. In preparation for a trial carbon markets, China has already ordered seven provinces and cities to set caps on greenhouse gas emissions and submit proposals as to how the targets will be allocated. On agriculture, China said its total grains output was expected to stand at 500 million tonnes in 2012, down 12.4 per cent from a year ago. It did not give individual breakdown for corn, rice and wheat. To ensure its food security, the government would also ramp up investments in rural areas to 1.23 trillion yuan ($195.29 billion) in 2012, up from 186.8 billion yuan in 2011, adding that it would also ship more grains which are in short supply. Cotton production was seen reaching 6 million tonnes, down from around 10 per cent from year ago.