China: NDRC Proposed Measures to limit Domestic Coal Prices

Chinese policy maker National Development and Reform Commission (NDRC) has put forward a series of measures to stabilise the domestic coal prices.

In its meeting held on 25 May’18, NDRC has reviewed the current supply and demand for coal as balanced; citing the recent hike in domestic coal was resulted from the combined effect of increased demand, import coal restriction and market speculations.

The policy maker had sought co-operation among coal miners and power utilities for keeping the prices stable and marking it in the green zone.

The measures suggested by NDRC includes boasting the coal output, encouraging power utilities to halt buying in the next two to three weeks or reduce inventories in order to bring spot coal prices back under 570 Yuan/MT from current levels of 650 Yuan/MT. Besides, it also emphasises on curbing pollution in the country.

The measures put forward in the NDRC meeting has been elaborated below:

1. Adding 2-3 MnT of long term contract volume, signing annual coal contract with capacity; and submit it to the operational bureau.

2. Fulfill balanced long term contract volume, not lower than the annual average volume in dull or peak season.

3. Adjusting the coal inventory of key power plants, appropriately lowering coal inventory to 15 days for power plants whose stock levels are above 20 days.

4. Guide the coal price to the green zone and standardize the annual and monthly long-term price. The monthly long term price will be reduced to 570 Yuan/MT, and the annual long-term agreement will not be able to exceed the green zone.

5. Exploring importing coal from West Virginia State of US.

6. Practically promote coal and electricity joint ventures.

7. Substantially promote ultra-low emission reform.

The reforms suggested by NDRC would put brakes on the surging domestic coal prices. However, market participants have anticipated that the direct intervention on power utilities may bring about a shortage with the approaching summer season, which in turn could increase the appetite for imported coal in the country.