NDRC warns coal producers against price hikes

Monday, 06 Jun 2011

Xinhua reported that China's top economic planner and price regulator the National Development and Reform Commission has vowed to punish thermal coal producers for price hikes amid the country's current electricity shortage.

The NDRC warned that punishments could include heavy fines of up to five times the amount of revenues generated by the hikes. The NDRC warning came after it raised prices of electricity for industrial, commercial and agricultural use across the country's 15 provinces and municipalities last month to encourage thermal power plants to generate more electricity.

The NDRC said it will strengthen its supervision of coal prices and launch a special inspection campaign for major coal producing provinces and regions.

Beginning June 1st 2011, prices of electricity for industrial, commercial and agricultural uses in 15 provinces and municipalities were raised by CNY 16.7 per 1,000 kilowatt hours.

State controlled contract prices for thermal coal, which is sold directly to power plants by coal producers, have remained almost unchanged since last year. Prices currently stand at CNY 570 per tonne.

Prices for regular coal, however, have risen to CNY 837 per tonne, creating great pressure for coal producers to raise the prices of thermal coal. In addition, imported coal prices also soared this year, adding pressure to the domestic coal market, where many analysts predict further hikes amid increasing electricity demands and decreased supplies of hydropower due to a lingering drought in the middle and lower reaches of the Yangtze River.

The NDRC has urged coal producers to increase production while strengthening its inspection of coal prices. NDRC and the Ministry of Railways sent a joint inspection team to review contracts related to thermal coal supplies to China's key coal producing regions of Shanxi, Shaanxi and Inner Mongolia.

China's top economic planner also met with managers of major coal companies, including the country's largest coal producers China Shenhua and China Coal, and instructed them to stabilize the thermal coal market. (sourced from Xinhua)