The Chinese government is introducing measures that will spur growth to help put a floor under thermal coal prices which have dropped by 20% this year.

''The economy in China is strengthening, so the expectation is demand will start to pick up toward the end of the third quarter,'' chairman of Shandong-based Yanzhou Weimin Li reportedly told Bloomberg in Sydney. ''From late September, you will see support for prices.''

''Internationally, the trend is very similar. We're hitting the bottom, and we're waiting for the market to pick up.''

The central city of Changsha, capital of Hunan province, last week introduced an 829.2 billion yuan investment plan to shore up growth, it was reported in Bloomberg.

Prices for thermal coal, used in power generation, have slumped because of waning demand and increased exports from the US, where lower gas prices have prompted substitution.

Li said Yancoal was in early talks with its 13% shareholder Noble Group to co-operate on global sales and marketing.

More lower-grade metallurgical producers are expected to follow the lead of Yancoal’s Austar mine in New South Wales which has now switched into supplying premium thermal coal, according to Foster Stockbroking.

Increased North American exports to Asian markets has seen prices of lower-ranked coals such as semi-soft and PCI suffer more than high grade coking coals because of the excess supply in the market, it said in a report.

The spot FOB price for low volatile PCI has dropped below $150 per tonne FOB; meanwhile semi-soft coking coal has dropped to US$115/t FOB.

“Austar has historically produced a benchmark semi-hard coking coal with relatively high sulphur,” Foster said.

“As Asian steelmakers began to replace low sulphur coal from Queensland with high sulphur coal from North America, the Austar coal was displaced from the market as it was no longer demanded by the steelmakers to use as a blend coal.

“This has resulted in Austar coal being sold as an energy adjusted premium thermal coal.”