China's coal market is now in the midst of a radical restructuring that has the potential to change how coal is produced, traded and consumed both in China and the rest of the world. The restructuring aims to integrate the coal and power sectors at giant "coal-power bases" that combined would churn out more coal annually than all the coal produced in the entire United States.
Coal-power integration is now a focal point of the Chinese government's energy policy, driven by the dramatic "coal-power conflict". Coal prices are market-based, but power prices are tightly controlled by the government. This has caused massive losses for Chinese power generators in 2008 and 2010 and triggered government intervention in the coal market with attempts to cap the price of coal. The pervasive conflict between coal and power is now driving the Chinese government to remake these markets.
Coal-power base policy aims to establish upwards of 14 major coal-power bases, each producing over 100 mt of coal with consuming industries on-site. The plan envisions that roughly half of China's coal production would be produced at a handful major coal-power base sites that are controlled by key state-owned enterprises (SOEs) and the central government.
PESD's new research analyzes China's coal-power base reforms and how they will impact Chinese and global coal markets.