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Tuesday, 12 October 10
COAL SPOT TRADING MAY SOOTH PRICING CONFLICTS - GLOBAL TIMES


Global Times reported that, Tianjin-based Bohai Commodity Exchange launched steam coal for spot trading for the first time Monday. Steam coal is mainly used for thermal power generation and heating.

On the first day of trading, steam coal prices closed at 815 yuan ($122.13) per ton, with 709,360 tons traded at 578.16 million yuan ($86.64 million), showing enthusiasm among traders.

The new trading will be based on free market price bidding and selling, said Zhang Xionghui, research and development director of the exchange.

Unlike futures contracts, spot trading reflects the true market, as the delivery is on daily basis leaving no room for speculation, Zhang said.

Coal trading is traditionally done through negotiations between sellers and buyers, which is time-consuming, inefficient and costly, he noted.

Such a trading platform can help the buyers and sellers to obtain the coal conveniently economizing the trading cost, said Song Zhichen, energy sector analyst with Shenzhen Zhongzhe Investment Consulting.

Coal and power companies have long been at loggerheads over coal price fixing.

Coal producers demand high prices forcing power producers into a difficult situation because the government will not let them pass the rising costs off to end users.

The coal price hikes in recent years, however, have forced the government to raise electricity prices, because of the losses incurred by power producers.

When coal producers asked for a price increase of 18 percent last year, the major power companies refused to accept, leading to blackouts in many provinces last winter. The trading officials hope to provide a better reference reflecting the true market rather than a monopoly price set by large coal producers.

"We hope to set an open and fair benchmark price for the market," said Yang Kejian, a manager at the commodities exchange
Source: Global Times (By Wang Xinyuan)

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