China,
the world's top coal importer, said it would scrap a regulation to cap
spot thermal coal prices and would no longer intervene in annual coal
price negotiations between sellers and utilities starting in 2013.
China's coal market has stabilised, and the sector no
longer needs such rules, the National Development and Reform Commission (NDRC)
said in a statement on its website on Friday, adding that the move was
aimed at reforming the coal industry.
Most traders said the government's decision to take its
hands off the market, first reported by Reuters in late November, could
help boost imports as domestic prices would no longer be kept artificially
low.
Coal price contracts currently are signed every year at an
annual meeting organised by the NDRC and the industry association. Coal
suppliers have to sell certain quantities to power companies at prices set
far below market rates.
Under this system, power companies have managed to buy
around half their annual coal consumption at preferential rates.
Contract prices for 2012 were set at around 599 yuan
($96.14) per tonne, and the government introduced a price ceiling on spot
coal prices in late 2011 of 800 yuan ($130).
In the international market, Australia's Newcastle spot
thermal coal index has fallen around 30 percent this year to about $84
this week.
Coal producer sources said they would continue to ink
long-term contracts with power companies but that, instead of a headline
price for the whole year, the terms would be adjusted on a more regular
basis to better reflect market conditions.
The end of government intervention is not bad news for
power companies such as Huaneng Power International and Datang Power ,
analysts have said, given that China's coal market is likely to be well
supplied over the next few years.
Coal producers said they have had preliminary talks with
buyers on volumes for the 2013 term contracts. Some said the volumes would
be largely unchanged and that they want to guarantee sales, since the
market could again be oversupplied next year.
Traders said the timing of the government's decision
suggests Beijing is no longer worried about coal shortages at home, which
led to severe price spikes in 2008 and late 2010.
"Production growth has risen over the past few years,
but demand growth has slowed. Imports have also risen sharply, and that
can easily fill any temporary shortage that might emerge in the
future," said a Beijing-based trader.
China's coal imports in the first 11 months of 2012 have
jumped nearly 30 percent to 205.5 million tonnes.
Analysts said China's coal imports are expected to rise
further in 2013 on the back of weak overseas demand and low international
coal prices. ($1 = 6.2302 Chinese yuan)
Reuters
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