China coal price cap could encourage exports-traders

LONDON, June 19 (Reuters) - A cap on Chinese domestic coal prices paid by utilities would encourage Chinese producers to increase sales of export coal, traders said on Thursday.

Chinese state news agency Xinhua reported earlier that China would temporarily cap "power coal prices" to prevent prices from rising higher than the price on June 19.

"Well, if they're capping domestic prices that's got to be bullish for exports," one trader said.

"We were already expecting to see more export coal because of the shutdown of power plants and factories around Beijing to clean up the air for the Olympics. That alone would have reduced demand quite a bit," he said.

So far this year domestic Chinese coal prices have been more attractive than export prices, traders said. Anything which makes exports more lucrative will encourage exports, they said.

China has fluctuated between being a net importer and net exporter over the past few months.

China issued 53 million tonnes of coal export quotas for the year starting March 2008, down 24 pct from 70 million tonnes in 2007.

China exported 18.5 million tonnes of coal from January to May this year, down 4.1 pct from the previous year, according to Chinese Customs figures. (Reporting by Jackie Cowhig; editing by James Jukwey)