Via Morgan Stanely:
Talk of the NDRC re-installing its 276-day yoke on China’s coal miners sounds bullish. But since the policy failed last year, why would they roll it out again? Expect something new. Latest NDRC news: The National Development and Reform Commission (NDRC) – China’s central government’s macroeconomic manager – is apparently considering resuming its controversial 2016 policy of limiting the industry’s operating days to 276-days/year (vs.normal rate of 330-days). Coal equities have lifted on the news, probably expecting another coal price surge like 2016’s:up 100-240% for all seaborne coal prices (met- & thermal) over a few months.
More moderate reform: It’s an odd market response, in our view. Since the NDRC itself was alarmed by how the ‘276-day’ policy delivered 2016’s coal supply collapse + price spike, prompting a series of industry meetings in Sep-16 (commodity fruitCAKE: Coal’s NDRC holiday,explained;22-Nov-16),ending in Nov-16’s policy backflip – then it seems more likely that the NDRC would pursue a more moderate reform program in 2017. Indeed, it apparently only seeks to cap output for 6-mths from mid-March (i.e. when central heating stops),and only in selected regions (Sina, Bloomberg,Feb 15). We await a formal announcement.
