China relaxes 276-days policy to stabilise coal prices: will it work?
China introduces production flexibility to increase thermal coal supply by 6-15 Mt/month from 74 mines nationwide. The measure will kick in when Bohai Rim Steam Coal Index hits RMB460-500/t range. The move will encourage lower cost mines and help consolidation. Policy easing is notional; we expect supply discipline and 276-day work rule to continue. We do not rule out further measures if price rally persists. The risk is on policy implementation and acceptance as monitoring will become difficult. At RMB460/t, 57 Mt Newcastle high ash thermal coal can price in. However, global exporters will continue to closely watch every move China will make given the significant impact on trade balance and prices.