(Yicai Global) Aug. 29 -- China's National Development and Reform Commission (NDRC), the country's top macro-economic planner, recently issued a policy statement on the upper and lower limits of the coal inventories of coal-fired power plants, coal mines and coal trading enterprises to ensure balanced coal market supply and demand, to prevent hoarding and profiteering, and maintain the stability of coal prices.
The inventory of coal-fired power plants in major coal producing areas such as Shanxi and Shaanxi provinces and the Inner Mongolia Autonomous Region should in principle be no less than 15 days of coal consumption. The inventory of coal-fired power plants in other areas should in principle be no less than 20 days, as the NDRC proposed in a document it posted on its website Aug. 28.
Before the peak period of coal use, the minimum coal inventory level of relevant power plants should increase by between five days and 10 days based on normal inventory. The lowest inventory level of lignite burning power plants should increase by five days based on normal inventory.
When the market falls short of demand and prices continue to rise rapidly, however, the inventory of coal-fired power plants should in principle not be more than twice the minimum inventory of the power plants. However, during peak coal use in summer, winter and major events, the highest inventory can increase between 10 days and 20 days.
The document also made the corresponding requirements for the minimum and maximum inventories of coal production and trading enterprises.
The NDRC document directed that relevant businesses report their previous month coal business and inventory data for each month to the relevant departments where they are located, and must report such data daily at special times such as during abnormal fluctuations in market prices. When necessary, the NDRC and related industry organizations will verify coal inventories in key areas.
The document also imposes specific penalties on companies that fail to comply with the highest and lowest inventory requirement or if fraud is present in their reported inventory data.