China 's National Development and Reform Commission may announce plans to reform thermal coal pricing by the end of the year, state-run Shanghai Securities News reported Thursday.

The reform will make China 's thermal coal pricing system a "fully market-oriented system" following government capping of prices for nearly a decade, the newspaper said.

Under the new pricing system, coal producers and power plants will be able to negotiate contracts with a duration of two years or more without government interference, it said.

Conditions for coal price reform are ripe. China has sufficient supplies of coal, which has helped power plants control costs. In addition, several railways exclusively for coal distribution will begin operating next year, which will help stabilize coal prices.

The expected announcement may help guide annual price discussions between coal producers and power plants next year, the newspaper said, adding that the proposal still has to be approved by the State Council, or Cabinet.

China currently has two systems for coal prices: an annual fixed contract price and a daily-adjusted spot price. When coal supply is tight and spot prices are high, contract prices protect the bottom lines of state-owned power producers but hurt coal suppliers.

China 's thermal coal pricing system was introduced in 1993. However, the government has intervened in price negotiations four times over the past decade, the report said.

The Bohai-Rim Steam-Coal Price Index, China's benchmark thermal coal price, last traded at 633 yuan a metric ton in the week to Sept. 12, up 0.5% after holding steady at 626 yuan/ton for four weeks in the week to Aug. 22, the lowest level since the index's launch in October 2010, due to oversupply.

Railway-transportation and electricity-price reforms are also being considered along with thermal coal price reform, Shanghai Securities News said, without elaborating.

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