MarketMinder

Headlines

Here we analyze a selection of third-party news articles—both those we agree and disagree with.

Please note: Though we make every effort to source articles from freely available sites, we will also regularly include articles on sites that have limited content for non-subscribers. Doing so is increasingly unavoidable, as more and more financial media is published behind paywalls.


China to Let Power Prices Rise in Bid to Fix Electricity Crunch

MarketMinder’s View: Here is an interesting development in governments’ current global quest to quell fast-rising energy prices and ensure consistent supply: For 15 years, China has employed a tight ceiling and floor on energy prices. But “[b]ecause the prices don’t fully move with market supply and demand, they leave room for power producers to make windfall profits when coal prices are low, while potentially forcing them to sell at a loss when coal prices skyrocket.” So now, contrary to actions in Europe, the Chinese government is allowing more price fluctuation and for these market prices to apply to more customers. While this isn’t a magic bullet, it should help utilities that have been bleeding cash lately—and implementing brownouts as a result—as coal prices spiked. Allowing prices to rise closer to those dictated by global market forces should encourage users to dial down demand while the improved cash flow should encourage utilities to ramp up production (or at least keep it constant).