Coal Price Cap to End
Monday, December 24, 2012
The cap on coal prices is likely to be canceled by the start of next month in a move that benefits miners and is neutral to utilities.
The National Development and Reform Commission has issued a circular to key coal miners and utilities that says the energy price will be determined by market demand and supply starting January 1, rather than in the current fixed range, Xinhua News Agency reported yesterday.
The top economic planning body said this is because coal price has stabilized. Under the current arrangement, the growth of thermal coal prices is capped at 5 percent annually. The market price of 5,000-kilocalorie coal is capped at 800 yuan (HK$994.52) per tonne.
"Coal companies are reluctant to sell their products to their electricity generation counterparts now under the artificially capped price," said AMTD Financial Planning general manager Kenny Tang Sing-hing.
Tang added the latest move can encourage the sale of coal. Its unit price is expected to rise as the mainland economy improves and power demand goes up.
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