Chinese government to regulate coal prices in the country
The price of January thermal coal futures during trading on the Zhengzhou Commodity Exchange (ZCE) fell to 1,033.8 yuan per tonne ($161.59, -13%) - 47% below the record highs of October 19 in 1982 yuan per ton (almost $310).
This happened after the State Committee for Development and Reforms of China (a key state regulator of the Chinese economy) directly intervened in the pricing of coal.
According to Reuters, the government has set a directive target for the mid-term price of thermal coal at 1,200 yuan per ton ($ 187.58). Such meetings with coal miners are held in Beijing almost every day and are aimed, , at identifying companies that "artificially inflate prices."
The prices set by the directive are close to the world prices. On October 28, FOB Newcastle energy coal futures traded at $177.7 per tonne (-2.97% to the previous trading session), according to data from the London Intercontinental Exchange (ICE). Futures on energy coal API2 Rotterdam traded at $ 176 per ton on October 28.
According to Reuters sources, traders from the key coal-mining regions of the country- Inner Mongolia and Shanxi, in turn, offered the authorities an indicator of 1,450-1900 yuan per ton ($ 226.65-297), but in the end agreed with the amount proposed by the government.
Still, according to analysts, even 1,200 yuan per ton of thermal coal remains too high a price for Chinese thermal power plants. Therefore, the next medium-term goal of Beijing is to lower the price by another 300-400 yuan to about 900-800 yuan per ton ($ 140-125, respectively). That will allow generating companies to operate without losses. Finally,
in the long term, Beijing wants to force coal miners to lower the thermal coal price to 440 yuan per tonne ($ 68.77), with a floating increase of no more than 20%. In addition, local authorities will be obliged to intervene in pricing when necessary during the heating season.
By: Eugene Gerden