China to further deregulate coal prices in 2008

Updated: 2007-11-26 14:39

China, the world's largest coal producer and consumer, will further deregulate coal prices and trading in 2008 after launching deregulation earlier this year that allowed producers and end-users to negotiate prices freely, the country's top economic planner said Monday.

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The National Development and Reform Commission (NDRC) said in a statement posted on its website that it expects the deregulated prices to flexibly reflect changes in supply and demand as well as relative costs to the environment, compared with previously state-set prices, which changed slowly for decades and lagged behind surging international prices in the past couple of years.

China's demand for coal is growing fast due to the country's booming economic activity. Coal, mainly used for power generation and metallurgy, accounts for two thirds of the country's energy mix.

Earlier this year, China ended its position as a net coal exporter and shifted to a net importer, mainly importing from Indonesia, Vietnam, Australia and Mongolia.

Surging demand and growing imports may lead to higher coal prices in 2008 for yearly contracts, which suppliers and end-users will sign in the first quarter.

Government agencies are prohibited from intervening in the price negotiations, said the statement, without predicting whether the prices will go up or not.

Contracted coal prices rose about 10 percent early this year after the government allowed deregulation.

The NDRC expects the country's coal supply and demand in 2008 to be mostly balanced, but shortages may occur in some regions due to limited transport capacity and seasonal peak power demand.

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