China’s Coal Prices Rally Just Won’t End By Shuli Ren
President Xi Jinping‘s supply-side reform has worked too well.
Coking coal and thermal coal futures rallied over 6% today, more than doubling this year.
Coking coal futures to be delivered next January went limit up on November 4, 2016
Beijing has been nervous about this coal rally for a while, asking coal miners to pump up production again. Recently, Beijing even asked China’s biggest coal miners to cut wholesale spot prices.
China Coal Group has already announced plans to cut its spot sales price by 10 yuan per ton in November, according to Chinese media.
China Coal’s price cut is just to please China’s central planners and has nothing to do with economics, lamented Goldman Sachs:
Historically, coal miners have a strong incentive to support the coal price at year-end, to gain better bargaining power in their annual contract coal negotiations.
According to SXCoal, negotiations for 2017 could take place in late-November this year, and the government is trying to settle the contract price around Rmb535-540/t for 5,500kcal/kg coal.
To be sure, analysts are broadly bearish on long-term coal prices. But coal production has this thing called momentum.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... -wont-end/
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