Runaway Coal Prices ;)4 Nov 2016 12:37
Coal prices keep rising despite government measures
By Chen Qingqing in Shenzhen and Ma Jingjing in Beijing Source:Global Times Published: 2016/11/4 19:08:39
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Coal prices in China continue to rise despite the government has urged coal producers to do more to stabilize the market.
The dominant contract for coking coal, coke and steam coal had surged by the daily limit to 1,405.5 yuan ($207.87) per ton, 1,918.5 yuan per ton and 668.2 yuan per ton respectively as of 3pm Friday.
The Bohai-Rim Steam-Coal Price Index (BSPI), an official gauge of the spot price of coal in northern China's major coal ports, recorded 18 weeks of price increases up to a record 607 yuan per ton on Tuesday, up 60 percent from the beginning of 2016.
"The soaring coking coal, coke and steam coal futures may be connected to the increase in coking coal, coke and steam coal spot prices," Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times on Friday.
The rise in coal prices has driven small-sized mines to resume production, with a similar phenomenon occurring in the steel industry, Li Yining, a prominent Chinese economist, told the third Dameisha China Innovation Forum Friday, in Shenzhen, South China's Guangdong Province.
"While some enterprises have had to increase their inventory to ensure future production, the total inventory [of coal] has been on the downturn recently, so when the demand goes up, prices increase," Li said, noting that the recent surge in coal and steel prices is "normal."
Lin Boqiang however said that the latest increase in coal prices is mainly due to the government's decision to cut down on the number of coal mine operation days, noting the reduction leads to a decrease in production which directly contributes to the rise in prices.
In April 2016, the National Development and Reform Commission (NDRC) together with two other government departments announced that domestic coal mines could only operate 276 days a year, down from the former 330-day cap.
Other economists said that the government should not have intervened in the process by slashing overcapacity. Shao Bingren, chairman of the China Private Equity Association, noted that setting the same production limit and ceiling for all coal mines, without considering variations between locations, will jeopardize the balance between supply and demand.
"The production volume of all mines has been slashed, and the prices will definitely increase when there is short supply," Shao said during the forum.
The NDRC also held a meeting on Thursday, its fourth in two weeks, where it urged coal producers to take measures to stabilize the market, media reports said, though Lin predicted the warning is unlikely to curb the increase in coal prices as it is not legally binding.
China's leading coal producers Shenhua Group, China National Coal Group Corp and Inner Mongolia Y
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