China finds compliance problems in coal price index probe

China’s state planner on Wednesday said it had discovered some “noncompliant” behaviour among coal price index providers as it announced the preliminary results of a probe into the industry.

The National Development and Reform Commission (NDRC) had announced the probe a month ago, saying it wanted to standardise conduct in the energy index provider business as part of its crackdown on record-high coal prices that were a key contributor to widespread power shortages in China.

“Judging from the preliminary assessment and compliance review, some coal price index behaviour has non-compliance problems,” the NDRC said on Wednesday, adding that this had “misled the market and … caused the price increase to deviate from the fundamentals of supply and demand.”

It did not name any of the 12 companies it said had been probed or specify how some of them had been noncompliant.

Dozens of organisations provide coal pricing data in China and their assessments can be used by traders as a basis for physical transactions.

China’s thermal coal futures CZCcv1 hit a record high of 1,982 yuan ($310) a tonne on Oct. 19, which was more than five times higher than a year earlier. They have since more than halved to around 940 yuan as authorities signalled a willingness to intervene in pricing and ordered miners to boost output.

Thermal coal was trading up more than 5% by 1400 GMT in night trading on Wednesday and remains up around 80% year-to-date.

The NDRC said it would further verify the issues identified in its probe and take disciplinary measures such as publicly naming the companies found to be non-compliant.

Other possible measures include ordering rectifications by a certain date, suspending publication of an index and including companies on a list of “untrustworthy entities”, it said, adding that any illegal behaviour uncovered would be investigated in accordance with the law.
Source: Reuters (Reporting by Beijing Newswroom; writing by Tom Daly; Editing by Kirsten Donovan)