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China Coal Futures Hit Again with News of Hoarding Probe

National Development and Reform Commission orders a “cleanup and rectification” of storage sites in major production areas

A worker shovels coal at a freight yard in Hefei, Anhui province. Photo: Reuters


Coal futures fell on Wednesday on news of a Chinese regulator’s plan to investigate how supplies of the fossil fuel are stored and crack down on illegal hoarding.

The most-traded thermal coal contract on the Zhengzhou Commodity Exchange slumped again, hitting its 10% limit on Wednesday. Its cumulative losses have totalled about 40% from record highs hit last week.

The National Development and Reform Commission (NDRC), the country’s main economic planner, on Tuesday ordered a “cleanup and rectification” of storage sites in coal production areas.

The agency said it would crack down on unlicensed coal storage sites in Shanxi, Shaanxi and Inner Mongolia, China’s main coal-mining areas.

NDRC said illegal traders were hoarding the fossil fuel and “seriously disrupting the normal operating order of the coal market”, as well as violating safety and environmental protection rules.

It is the latest coal-related edict from the NDRC, which announced on Tuesday that it would study the establishment of a “coal market price formation mechanism to guide the long-term stability of coal prices in a reasonable range”.

The latest NDRC moves follow an announcement on Monday that it would investigate coal index providers, following claims that some have falsified or manipulated transaction prices.

The planner said it had “received reports from the public that some coal and other energy information agencies have not used real trading prices, abused inquiries, published hearsay information, and even fabricated and published false price indices”. It did not name the agencies it would investigate.

The NDRC said it would consider creating a coal pricing mechanism that weighs costs and profitability. “The establishment of an agency power purchase mechanism for grid companies to ensure the smooth operation of the mechanism is a clear requirement for further deepening the reform of coal-fired power generation,” the agency said in a statement.


• By George Russell.




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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.


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