China still has a long way to go in establishing a properly functioning national coal exchange as suppliers and buyers would likely continue to sell the commodity through contracts that allow for bargaining, industry experts and analysts said.
However, the approval for the establishment of a coal exchange was an encouraging sign that the country was working towards higher transparency in pricing and the possibility of futures for hedging, they said.
Earlier this month, the State Council, or cabinet, approved the establishment of a national coal exchange in Taiyuan, capital of Shanxi, using the Taiyuan Coal Trading Market as the platform.
The exchange would be operated by a shareholding company owned by producers, traders, logistics firms and users, with a plan to spend one billion yuan to build an exchange hall and a conference and exhibition centre from September, according to mainland media.
Trading volume was targeted to more than double to 500 million tonnes when the exchange is set up, from 215 million tonnes last year, according to Taiyuan Coal Trading Market general manager Ouyang Yexin.
The exchange initially will focus on spot market and cross-province trading and will be extended to futures and inter-region trading at a later stage.
