The Standing Committee of the National People’s Congress of China recently approved the modification of China’s Law on Coal, which cancels articles on business licenses for coal production and operation.

The abolishment of coal business licenses, which have existed for nearly 20 years, is expected to favour domestic steel and power producers as they would have more choices in selecting coal supplies and the cost of coal is very likely to drop as a result, analysts believe.

Currently, large steel and power producers have to use a government-appointed coal supplier. New entrants in the coal business are subject to a longer trial in reliability of coal quality and reliability of supply. Leading coal companies would therefore be able to maintain their position steady on the market.

Nevertheless, the cancelling of coal business licenses will let in more participants in the coal business and higher degree of market competition.

Source: China Metals e-mail