THE government is seeking to lower domestic coal prices to aid power producers, and has proposed that miners bring the benchmark grade to below 600 yuan (US$87) a ton, according to sources with knowledge of the matter.

The National Development and Reform Commission made the proposal to coal producers after six major utilities sought the government’s help to reduce their raw material costs in order to deliver a cut to power prices, Bloomberg News quoted the sources as saying yesterday. China plans to lower electricity prices for industrial and commercial users by 10 percent this year.

The country’s top economic planning agency wants to bring monthly contract prices down to a so-called “yellow zone” and is targeting benchmark coal with energy value of 5,500 kcal/kg coal at less than 600 yuan, the sources said. A final decision has not been made, according to the sources.

The step isn’t unusual. China is the world’s largest user and producer of coal, and has previously sought to balance the needs of its power enterprises with those of miners by securing a price range of about 500 to 570 yuan. Domestic coal has risen this year, spurred by mine inspections and import restrictions that crimped supply.

The spot price at Qinhuangdao Port rallied to 634 yuan in March and has held steady despite an off-season for demand.

The country’s biggest power producers include China Huaneng Group and China Datang Corp. Its top miners are China Shenhua Energy Co., Yanzhou Coal Mining Co. and China Coal Energy Co.(SD-Agencies)