CHINA’S top economic planner said yesterday it was studying a mechanism to stabilize coal prices over the long run, in its latest move to cool the red-hot market.

The National Development and Reform Commission (NDRC) said it was looking into the costs and profitability of the coal sector in an effort to work out a mechanism to guide prices to move within a reasonable range.

The NDRC was also considering including coal in a “prohibiting exorbitant profits” category.

The new mechanism would be based on a benchmark price plus a floating range, after taking into account costs, reasonable margins and market changes, it said.

“The mechanism shall be linked to the marketization of the thermal power sector ... and those who do not strictly follow the mechanism will be severely punished,” the commission said.

While China’s thermal coal futures have come off record highs since last week, after the government pledged to intervene, they are still up more than 130 percent year-to-date.

The contract closed down 7 percent at 1,237 yuan (US$193.71) per ton yesterday, tracking five straight days of declines.

The government has indicated that 500-570 yuan per ton is a reasonable range for long-term thermal coal contracts.

A shortage of coal, China’s main fuel for power generation, has led to electricity rationing for industry in many regions, weighing on factory gate inflation in the world’s second-biggest economy.

China is the world’s biggest producer and consumer of coal, and has been increasing output to meet demand but the supply situation has seen slow improvement, analysts have said.

(SD-Agencies)