US economy

China NDRC studying mechanism to stabilise coal prices over long-run

© Reuters. FILE PHOTO: China Energy coal-fired power plant is pictured in Shenyang, Liaoning province, China September 29, 2021. REUTERS/Tingshu Wang

SINGAPORE (Reuters) -China’s top economic planner said on Tuesday it was studying a mechanism to stabilise coal prices over the long run, in its latest move to cool the red-hot market.

The National Development & Reform Commission (NDRC) is looking into the costs and profitability of the coal sector in an effort to work out such a mechanism that will guide prices to move within a reasonable range, it said.

The NDRC is also considering to include coal into the category of “prohibiting exorbitant profits”.

The new mechanism will be based on a benchmark price plus a floating range, after taking into account costs, reasonable margins and market changes, it added.

“The mechanism shall be linked to the marketisation of the thermal power sector … and those who do not strictly follow the mechanism will be severely punished,” it said.

While China thermal coal futures have come off record highs since last week after Beijing pledged to intervene, they are still up about 150% year-to-date.

The contract last traded at about 1,233 yuan per tonne, down 7% by 0155 GMT.

The government has indicated that 500-570 yuan per tonne is the reasonable range for long-term thermal coal contracts.

On Monday, the NDRC said it would investigate index providers in a bid to tame runaway prices.

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