China plans to further liberalize domestic coal market

China is expected to pursue further liberalization of its domestic coal market within the next several weeks following the announcement of plans to scrap its annual coal contract system.

Reuters reports that the National Development and Reform Commission (NDRC), one of China's most authoritative policy bodies, has submitted a proposal to the State Council to scrap the current system which requires that suppliers provide a set quantity of coal to power producers at preferential prices.

Sources say approval is expected as early as the next several weeks, prior to the annual coal contract conference which customarily begins in early December.

Policy-makers reportedly consider this a propitious time to open up the coal market due to the sharp decline in spot prices this year, with Australia's Newcastle spot thermal coal index declining as much as 30% since the start of 2012 to $81 per tonne.

China is the world's biggest buyer of thermal coal, which remains a key source of energy for its expanding economy, and the liberalization measures are expected to increase import levels as domestic prices will no longer be artificially suppressed.