China completes signing of 260 Mt of coal term contracts for 2022, state media

China’s major coal mines have completed the signing of the first batch of medium- and long-term coal supply contracts with some domestic large utilities and steelmakers, with the volume totaling more than 260 million tonnes, during the national coal trade fair in December 3-5 in Rizhao, Shandong province, state media CCTV reported.

The price was a major concern for insiders. According to a recent draft by the country’s top economic planner National Development and Reform Commission, the term contract price is comprised of the benchmark price plus a fluctuation range, in which the benchmark has jumped from the existing 535 yuan/t to 700 yuan/t, basis 5,500 Kcal/kg NAR at northern ports, making the term price able to fluctuation from 550 yuan/t to 850 yuan/t on a FOB northern ports basis with VAT. The price will be revised every month as per the spot fluctuations.

The entire signing of medium- and long-term contracts are expected to be completed ahead of December 15, the state media said.

While utilities are actively responding to the signing, some of them remain under operating pressures due to a heavy loss this year. Spot prices have soared to a record of 2,600 yuan/t FOB at northern ports, more than doubling the highest hit last year.

According to the statistics by China Electricity Council, elevated coal prices had additionally cost utilities by 431.8 billion yuan over the first 10 months of this year. Therefore, the signing of term supply contracts will help power companies to stabilize procurement costs and guarantee sufficient power supply.

Zhang Hong, spokesman of China National Coal Association, said strengthening the signing of medium- and long-term contracts is a must especially in terms of coal-burning for power and heat. For 2022, the government required all consumption for power and heat should be 100% covered by term contract supplies as well as imports, which will leave a smaller room for the spot market.

Note: This article has been exchanged under the article exchange agreement between CoalMint and Sxcoal.