The nation's top economic planning agency said on Thursday that some key producers have acted on their own to lower spot prices for coal as the fundamentals do not support a further rise in coal prices.
Coal is a fuel important to a number of industries and heating operations in China.
China National Coal Group Corp, the nation's second-largest coal producer, decided to lower the steam coal spot price by 10 yuan ($1.48) per ton, effective Thursday, based on "rational analysis" of the supply-demand dynamics of the market, news portal under the National Development and Reform Commission (NDRC) reported Thursday. The report did not mention specific numbers for the price but the current long-term contract coal price stood at around 550 yuan per ton.
The NDRC also held a meeting on Thursday, the fourth in two weeks, at which it urged coal producers to do more to stabilize the market, which has seen a price rally that has alarmed downstream industries such as steel and coal-fired power plants. Coal producers will gather to focus on long-term coal negotiations at the end of this month.
Jiang Kejun, a senior researcher at the NDRC Energy Research Institute, said the fundamentals do not support coal prices rising further.
"If prices can stay at current levels, it will be good for coal producers. But whether that will happen remains to be seen," Jiang said.
Jiang noted that although the NDRC could urge producers to take various actions, such suggestions have no legal binding force, and some may still choose to lift output to cash in on the current market.
"Now with the ports and power plants nearly finishing their stockpiling process, a rapid increase in coal output could send coal prices back to where they started," Jiang said.
The Bohai-Rim Steam-Coal Price Index, a benchmark index, rose to 607 yuan per ton last week, a year-to-date increase of over 60 percent.
Much of the winter heating in northern China relies on coal-fired power plants. Rising inventories at power plants and ports can effectively ensure demand for electricity and heating during the winter season, the NDRC said Thursday.
As of November 1, key power plants across the nation held 65.78 million tons in coal inventories. The figure surpassed 60 million tons on October 12 and 65 million tons in October 29, according to a statement posted on the website of the NDRC on Thursday.
Coal inventories have steadily recovered, bouncing back 37 percent from the lowest point of 48.01 million tons on August 21, the statement said.
