China’s National Development and Reform Commission (NDRC) said it was considering a mechanism to guide coal prices within a “reasonable range” over the long term. The state planner is also studying a curb to prevent producers from taking “exorbitant profits.” It said that the mechanism would be based on a benchmark price plus a floating range after taking into account costs, reasonable margins, and market changes. It also pledged punishment for those who do not strictly adhere to the mechanism.
China’s thermal coal futures settled down 7% to CNY1,237 ($193.7) on Tuesday. Despite the decline, the contract is still up more than 130% since the start of the year. The government has signalled that CNY500-570 ($78.3-89.3) per ton is considered a reasonable range for long-term thermal coal contracts.
Beijing has taken a series of measures to tame the volatile coal market, which has led to a severe power crunch in many parts of the country. On Monday, the NDRC said it would launch probes into price index providers after banning a coal trading company from publishing price index and market news in September. Analysts expect China to continue experiencing a coal and power deficit through the end of the year due to lower domestic coal output and despite stronger-than-expected imports.
