Shenhua Group's Coal Price New Deal Accused

On July 22nd, a reporter learned from insiders that Shenhua Group introduced two new pricing policies on Friday, July 19th. The first policy, effective from the 26th, changes the way coal prices are settled. Instead of weekly settlements, Shenhua will now settle once at the end of each month, using the lowest price of the same coal category during the current week as the benchmark—from the 18th to the end of the month. The second adjustment involves resuming the long-term pricing for coal with 4,500 kcal or less, but increasing the base price by 5 yuan per ton. Representatives from Shenhua Group’s Sales Company confirmed the details of the new pricing policy to reporters. Zhang Zhibin, an analyst at China Coal Grand Consulting Center, told the “Daily Economic News” that these changes mark a significant shift in Shenhua’s approach, essentially serving as a disguised way to lower prices amid the ongoing decline in coal prices. According to the reporter’s understanding, Shenhua previously set one price per week based on the Bohai Rim Index. The new policy, which marks the 26th working week of the year, introduces more flexibility in price adjustments. Analysts believe that by setting the price at the lowest weekly rate, the market can respond more dynamically to demand fluctuations. Zhang noted that before this change, Shenhua had used multiple weekly settlement prices. Now, with monthly settlements based on the lowest weekly price, it effectively reduces the overall cost. “This policy is designed to boost customer interest,” he said. Regarding the second part of the new policy, Zhang pointed out that it applies to a smaller portion of Shenhua’s thermal coal—specifically low-grade coal with 4,500 kcal or less. Although this type of coal currently has decent trading volumes in ports, its scope is limited compared to other categories. Overall, he believes the price adjustments are significant and may prompt other coal companies to follow suit. Earlier in May, there were rumors that Shenhua had decentralized its pricing power, moving away from its previous model tied to the Bohai Rim Coal Index. Some media reported that Shenhua no longer linked its prices to the index, and the previous pricing mechanism had collapsed. However, Shenhua’s sales company denied this, stating that they still use the Bohai Rim Index but keep the exact calculation method confidential. Analysts explained that because Shenhua’s pricing is closely tied to the Bohai Rim Index, any drop in the index would directly impact their prices, creating a feedback loop. In late June, China Coal Energy led a price cut, reducing thermal coal prices by 28 yuan per ton in northern ports. Shenhua later adjusted its spot coal prices, triggering a wave of similar moves across the industry. Recently, Shenhua announced a second round of price cuts, prompting major coal groups like Shanxi Coking Coal, Tongmei, Yangmei, Zhaoan, and Shanxi Coal to discuss coordinated pricing strategies. These companies aim to implement a unified pricing model—same region, same coal type, same quality, same market, and same price—to reduce internal competition and stabilize regional coal prices. Industry insiders suggest that Shenhua is planning to decentralize pricing authority from the group headquarters to its sales subsidiaries, giving them more autonomy to adjust prices and capture market share. However, the company has not officially confirmed these reports, and some insiders remain skeptical about the term “decentralization,” noting that current pricing models still require group-level approval.