Coal price rises, contract coal is limited again

Since September of this year, the domestic coal market has undergone great changes. In a larger region, there has been a tight supply of coal. In some regions, there has been a tight supply of coal. Due to the increase in coal demand and supply shortage, the coal market has been compared. Active, prices in most parts of the country have turned up in turns.

When interviewed by the China Economic Times, senior coal market expert Li Chaolin believed that under the condition of excess coal production capacity, coal prices continued to rise significantly. In addition to the winter coal price increase in the advent of the market, inflation was the recent increase in coal prices. One of the main promoters.

He believes that in order to withstand the economic crisis, the country has adopted a proactive fiscal policy, the currency circulation and the amount of money have increased substantially, and the entire society has increased its money supply, resulting in a significant increase in China’s CPI and PPI this year. Depreciation and inflation naturally cause prices in the trading market of the entire society to rise and boost the price of coal trading.

In addition, Li Chaolin also believes that the supply and demand situation in the market is the most fundamental reason for the rise and fall of coal prices. Without considering inflation, the rise and fall of coal prices follows the laws of market economy and is determined by the law of value. Since September of this year, due to the influence of various subjective and objective factors, the demand in the coal market has increased and the supply of coal has been relatively insufficient. This has also led to aggravation of the coal market's insufferable situation, and eventually the transaction price of the coal market has continued to climb.

The Citi Research report recently stated that China’s net coal imports should increase from 143 million tons (estimated) in 2010 to 233 million tons. The supply gap is widening, domestic and international (coal) prices should increase, and huge demand may drive next year’s China. The price of coal contracts rose by 8%.

Market coal prices have continued to rise due to planned coal prices. The power plants have been under heavy pressure. Many home appliance companies have called for “cannot afford the pressure brought about by rising costs.” Various ways are required to increase the price of electricity. However, in the face of persistently high price pressures, the National Development and Reform Commission seems to be helpless. It can only request coal prices through administrative orders.

On December 1, the National Development and Reform Commission made it clear that in 2011 the key contract coal prices will remain unchanged in 2010, and no increase in any form may be required. The coal production and transportation companies are not allowed to artificially interfere with and speculate on coal prices, and consciously do not increase prices or raise prices, so as to keep the market coal prices basically stable.

The National Development and Reform Commission officially issued the "Guiding Opinions on Improving the Coupling of Coal Production, Transportation, and Demand" formally issued on December 15, 2009, and called for the cancellation of the 2010 coal video conference, convergence meeting, and contract summary meeting. This marks the end of the national coal ordering conference that began in 1993. The government completely withdrew from the coal and electricity negotiations. China's coal production and transportation needs to fully enter the market-based autonomous trading state. However, only one year later, the NDRC raised the limit on the price of the contracted coal.

For the seemingly contradictory practice of the National Development and Reform Commission, Li Ting, an analyst at the China Circulation Productivity Promotion Center, told the China Economic Times that market coal prices have risen sharply in recent days, cost pressures for power generation companies have increased, and electricity prices have increased. The voices are getting louder, but due to the current inflationary pressures, the electricity prices cannot be easily raised, so the government has to suppress the rise of coal prices from the source.

“In October, the CPI rose 4.4% year-on-year, hitting a new high in 25 months. In November, the year-on-year increase in CPI may continue to rise. Inflation pressure should not be overlooked, and the increase in electricity prices will inevitably increase inflation expectations and increase inflationary pressure.” Li Ting In addition, at the end of recent years, the coal and power companies will begin negotiations on coal-electricity contracts in the coming year. From the perspective of the current macroeconomic situation, or from the perspective of industry development, they are all unfavorable to power generation companies, and coal companies have obvious advantages in terms of negotiation. The competent authority also needs to come out to mediate.