Is Chinese Coal Prices in Line with Hotelling Rules?-A Case Study in Shaanxi Province

Following the fully market-oriented mechanisms in the Chinese coal market, we studied whether the coal price was in line with Hotelling rule in the case of Shanxi Province. We tested the Hotelling rule based upon the available monthly data of coal production costs and pithead price from January 2006-March 2014 in Shanxi Datong Coal Mine Group and Shanxi Coking Coal Group. The result shows that: the fitness of the Hotelling on the thermal coal of Shanxi Datong Coal Mine Group and coking coal of Shanxi Coking Coal Group is 40.0% and 10.7% respectively, the fitness of quadratic is 76.0% and 69.1%. Coal price appears to follow the inverted "U" shaped with "inflated" value. From 200 to 2011 the coal price shows an increasing trend, while from 2012 to 2014 the coal price shows a decreasing trend. The reasons why it appears "U" shaped include: the structural contradiction between supply and demand of coal, over investment, macroeconomic adjustment, the effect of oil price, national policies to promote energy conservation and so on. Finally, policy adjustment suggestions are put forward.