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NDRC looks to shake up coal pricing

By Wang Jiamei  (Global Times)

09:36, November 27, 2012

A plan to fully liberalize China's thermal coal pricing mechanism was recently submitted to the State Council by the National Development and Reform Commission (NDRC), the country's top economic planner, the Shanghai Securities News reported Monday, citing unnamed industry sources.

With an ultimate goal of scrapping annual contracts altogether, the NDRC intends to encourage coal suppliers and power plants to ink medium- or long-term contracts with durations of three to five years during the annual thermal coal contract meetings which are likely to be held in mid- or late December of this year, according to the report. The new policy described by local media would mark the first time in nearly two decades that the country's coal supply has been completely exposed to market forces.

In another major development for the coal industry, the NDRC is also expected to stop issuing framework plans to allocate railway capacity for thermal coal transportation. Buyers and sellers would instead have to bring their long-term contracts to local railway departments to secure the freight capacity they need.

"Based on the NDRC's plan, railway transportation will become an important tool to promote long-term supply contracts in the future," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times. "Only after coal suppliers and power plants sign multi-year deals can they get their supplies transported through the rail system. This is a smart way to ensure stable supplies and reduce regulatory interference in the negotiation process."

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