Gov't steadies coal price to curb inflation
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The National Development and Reform Commission (NDRC) has asked the country's major coal companies to keep coal price stable, another effort to curb worsening inflation.
"All coal companies should keep annual contract coal prices steady, while State-owned coal firms should also maintain the current level of spot coal prices," the country's top planning body said Friday on its website.
The benchmark term price signed by top coal miner China Shenhua and utilities for coal with 5,500 kcal/kg (NAR) was 570 yuan ($83.93) a ton, while the spot price for the same grade of coal stood at about 760 yuan ($111.91) a ton.
Coal prices are a key input factor for coal-fired electricity prices and can have great significance on the country's inflation.
In May, the consumer price index, an index of inflation, rose 3.1 percent compared with the same month last year, overtaking the government's own inflation target of 3 percent for the year.
In the past, the government has quickly hiked interest rates to curb inflation, often at the expense of GDP growth, but this year it has not taken that step yet.
"Policymakers will hike interest rates in the third quarter if the inflation rate still goes up," said Sun Junwei, analyst with HSBC.
"But the government is putting off deciding what to do with interest rates and yuan revaluation because of the uncertainty brought on by the European debt crisis," said Sun.
Trying to keep coal prices under control is a move to stave off inflation without running a major risk of upsetting the economic recovery.
Thanks to the NDRC's annoucement, shares of the country's major coal companies fell Monday on the Shanghai Stock Exchange.
China Shenhua fell 1.45 percent to 23.15 yuan ($3.41), China Coal dropped 1.63 percent to 9.06 yuan ($1.33), and Yanzhou Coal was down 2.57 percent to 17.83 yuan ($2.63).
