December 04, 2008

China to further deregulate coal prices in 2008

It is reported that China, the world's largest coal producer and consumer, will further deregulate coal prices and trading in 2008 after launching deregulation earlier this year that allowed producers and end users to negotiate prices freely.

The National Development and Reform Commission in a statement posted on its website said that it expects the deregulated prices to flexibly reflect changes in supply and demand as well as relative costs to the environment, compared with previously state set prices, which changed slowly for decades and lagged behind surging international prices in the past couple of years.

The statements added that earlier this year China ended its position as a net coal exporter and shifted to a net importer, mainly importing from Indonesia, Vietnam, Australia and Mongolia. It added that
”Surging demand and growing imports may lead to higher coal prices in 2008 for yearly contracts, which suppliers and end-users will sign in the first quarter. Government agencies are prohibited from intervening in the price negotiations. Contracted coal prices rose about 10% early this year after the government allowed deregulation.”

The NDRC expects the Chinese coal supply and demand in 2008 to be mostly balanced, but shortages may occur in some regions due to limited transport capacity and seasonal peak power demand.