China's coal crisis has largely been resolved with gains in both production and stockpiles sufficient to ensure power supplies over winter. But it's not quite a total victory, as thermal coal prices remain at historically high levels, and are still above the range the authorities are believed to view as comfortable for both miners and power utilities. Beijing appears to be well aware that prices are still too high, sparking a fresh selloff of the main domestic thermal coal futures contract on Monday merely be releasing a statement saying it was time to reform the pricing mechanism. Thermal coal futures on the Zhengzhou Commodity Exchange slumped 5.4% on Monday to end at 821.2 yuan ($128.51) a tonne. The contract reached a record high of 1,982 yuan a tonne on Oct. 19 amid coal shortages and fears as to whether there would be enough of the polluting fuel to meet peak winter demand. The spot price of coal at Qinhuangdao in north China has also retreated from record highs, falling from a peak of 2,545 yuan a tonne to 1,090 yuan on Monday, meaning physical coal still commands a premium over the most-traded future, which expires on Jan. 10. The coal crunch was largely self-inflicted by authorities, with mine closures on safety grounds cutting output in the first half, while imports were also affected by the ongoing unofficial ban on buying from Australia as part of a political dispute between Beijing and Canberra. China is the world's biggest producer, consumer and importer of coal, and was thus able to respond to the shortage of the fuel by ramping up domestic production and importing more. While a retreat in the futures price of 59% in less than six weeks is a dramatic move, it still leaves the price above the 550 to 600 yuan range the market has long believed is the government's target. Futures were at 451 yuan a tonne on the last trading day of November 2020, and the peak in the previous winter was just under 600 yuan a tonne. It's unlikely that the price will fall to those levels quickly, but China's state planner, the National Development and Reform Commission (NDRC), is clearly targeting further declines. "After recent abnormal rise in coal prices, it is time to improve the coal prices mechanism," said the NDRC in a statement, adding that all market participants have reached a consensus on the reasonable range of coal prices. read more WHAT IS 'REASONABLE'? But the price deemed reasonable wasn't released, leaving considerable uncertainty as to whether the NDRC is going to want a return to the 550 to 600 yuan range, or whether it's prepared to sanction structurally higher prices in order to ensure mining companies commit capital to maintaining output. Certainly, the forward curve for futures suggests the price band is now higher, with the lowest price in the net 12 months being the 686.6 yuan a tonne for the contract expiring in September 2022. These prices may look somewhat elevated in light of the rapid response seen in domestic output and imports. The NDRC said last week the volume of coal stored at power plants was 147 million tonnes, and would reach an all-time high by the end of November. Furthermore, coal output is around 12 million tonnes a day, and is exceeding consumption by about 2 million tonnes. Imports have also picked up in recent months, and November's seaborne arrivals are on track to be the highest since August, according to Refinitiv. Seaborne imports of all grades of coal are estimated at 22.64 million tonnes in November, up from October's 21.74 million and almost double the 11.84 million from November last year, according to Refinitiv vessel-tracking and port data. If the current domestic production volumes are maintained and authorities continue to intervene in the market, it's likely that China's domestic coal prices will continue to drop. GRAPHIC: China coal production vs spot price: https://tmsnrt.rs/3IgLTkr Editing by Sam Holmes Our Standards: The Thomson Reuters Trust Principles.