China coal fumble casts doubt on its global commodities pricing goal

Fri Nov 11, 2016 1:53am EST
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By Meng Meng and Josephine Mason

BEIJING (Reuters) - Unprecedented steps by Beijing to snuff out a months-long rally in coal prices are casting fresh doubts on China's drive to become a global price-setting hub for commodities worth trillions of dollars.

The world's top consumer of many raw materials has been pushing to boost its influence on pricing of everything from iron ore to oil, mainly through steps such as promoting Chinese futures contracts as regional or global benchmarks.

But analysts and traders said that a wave of moves to cool coal prices, which surged as a side-effect of radical government measures to fight pollution by curbing mining, show that Beijing could be reluctant to let markets trade freely and openly.

"(Moves like those taken in coal markets) dampen hopes from investors that the government will be transparent," said Wang Fei, a coal analyst in eastern China.

Soaring coal markets have sparked a weeks-long effort by China's state economic planner, the National Development and Reform Commission (NDRC), to rein in prices, culminating in Wednesday's announcement that two of the nation's top coal miners had signed long-term supply contracts with a utility at a quarter below current spot rates.

Market sources said the body had ramped up its meetings with coal miners to as many as three a week from the usual monthly gatherings. The latest meeting is scheduled for Friday.

Adding to its scrutiny over the market, the NDRC also said on Wednesday that it was vetting the sector for hoarding, as well as investigating a coal pricing data firm in the province of Shanxi for "problems" in its data.

While the NDRC did not give any details, FenWei Energy, a Shanxi-based coal data company, this week suspended its spot physical thermal coal price index - used as the domestic industry benchmark - saying its prices did not reflect the majority of business transacted in the country.   Continued...

Workers unload coal at a storage site along a railway station in Hefei, Anhui province, China October 27, 2009.   REUTERS/Jianan Yu/File Photo